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Economic Analysis of Investment Operations : Analytical Tools and Practical Applications - Jee-Peng Tan

Economic Analysis of Investment Operations

Analytical Tools and Practical Applications

Paperback Published: 5th February 2001
ISBN: 9780821348505
Number Of Pages: 296

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'Economic Analysis of Investment Operations' presents general principles and methodologies that are applicable across sectors, including quantitative risk analysis. It provides both theory and practice about how to evaluate transportation, health, and education projects; and explains how to assess the environmental impact of projects. It provides a fresh look at the tools of project analysis and explains how to apply quantitative analysis of costs and benefits from multiple perspectives-including the private sector, the public sector, bankers, and the country as a whole. The examples used to illustrate the principles are drawn from actual projects of the World Bank and other institutions.

Forewordp. xi
Acknowledgmentsp. xiii
Glossaryp. xv
Introductionp. xxv
An Overview of Economic Analysisp. 1
The Economic Settingp. 2
Rationale for Public Sector Involvementp. 2
Questions That Economic Analysis Should Answerp. 3
Conceptual Frameworkp. 9
Economic Opportunity Costsp. 10
Risk Analysisp. 12
The Process of Economic Analysisp. 14
Transparencyp. 16
Consideration of Alternativesp. 17
With and Without Comparisonsp. 17
Private Sector Counterfactualp. 19
Separable Componentsp. 21
Getting the Flows Right: Identifying Costs and Benefitsp. 25
Cash Flow Analysisp. 27
Sunk Costsp. 27
Interest Payments and Repayment of Principalp. 28
Interest during Constructionp. 28
Physical Contingenciesp. 29
Transfer Paymentsp. 29
Donations and Contributions in Kindp. 30
The China Agricultural Support Services Project: An Examplep. 30
Externalitiesp. 32
Consumer Surplusp. 33
Getting Prices Rightp. 37
Numeraire and Price Levelp. 37
Economic Analysis and Inflationp. 41
Financial Analysis and Inflation: A Digressionp. 42
Market Prices versus Economic Costsp. 44
Valuation of Inputs and Outputsp. 44
Tradable and Nontradable Goodsp. 45
Valuation of Tradable Goodsp. 46
Shadow Exchange Ratep. 49
Premium on Foreign Exchangep. 50
Other Sources of Premiumsp. 52
Valuation of Nontradable Goods and Servicesp. 53
Conversion Factorsp. 56
Marginal Cost of Public Fundsp. 57
Valuing Environmental Externalitiesp. 59
Environmental Externalitiesp. 61
Project Boundaries and Time Horizonp. 61
Valuation of Environmental Impactsp. 62
Preventing and Mitigating Environmental Impactsp. 70
Cost-Effectivenessp. 73
Relating Costs to Benefits: Cost-Effectiveness Analysisp. 74
Assessing Unit Costsp. 77
Relating Costs to Benefits: Weighted Cost-Effectivenessp. 78
Comparing Options with Subjective Outcomesp. 80
Some Important Caveatsp. 81
Economic Evaluation of Education Projectsp. 83
Categories of Project Costsp. 83
Organizing and Presenting the Cost Datap. 85
Relating Costs to Benefits: Cost-Benefit Analysisp. 86
Computing Rates of Return to Education by Levelp. 94
Economic Evaluation of Health Projectsp. 99
The Steps of Economic Analysisp. 99
An Immunization Example: A Child Immunization Programp. 101
Value of Lifep. 117
Examples of Measures of Performancep. 118
Examples of Potential Benefits from Health Projectsp. 119
Economic Evaluation of Transport Projectsp. 121
Conceptual Frameworkp. 122
Forecasting Demandp. 124
Normal, Generated, and Diverted Trafficp. 124
Reduction of Vehicle Operating Costsp. 126
Time Savingsp. 126
Accident Reductionp. 131
Producer Surplus or Net National Income Approachp. 132
Network Effects within a Modep. 137
Intermodal Effectsp. 137
Timingp. 138
Environmental Impactp. 140
The Highway Development Modelp. 140
Gainers and Losersp. 141
Fiscal Impactp. 141
Risk and Sensitivity Analysisp. 143
Sensitivity Analysisp. 143
Switching Valuesp. 145
Selection of Variables and Depth of Analysisp. 146
Presentation of Sensitivity Analysisp. 147
Shortcomings of Sensitivity Analysisp. 148
The Expected Net Present Value Criterionp. 149
NPV versus Best Estimatesp. 149
Products of Variables and Interactions among Project Componentsp. 151
Monte Carlo Simulation and Risk Analysisp. 151
Assigning Probability Distributions of Project Componentsp. 152
Assigning Correlations among Project Componentsp. 155
A Hypothetical Example: Advantages of Estimating Expected NPV and Assessing Riskp. 156
Risk Neutrality and Government Decisionmakingp. 160
When the NPV Criterion Is Inadequatep. 164
Gainers and Losersp. 167
Dani's Clinicp. 168
Republic of Mauritius: Higher and Technical Education Projectp. 171
Conclusionsp. 187
Estimation of the Shadow Exchange Ratep. 189
Key Assumptionsp. 192
Employment Ratesp. 192
Incremental Income for University Graduatesp. 193
Incremental Income for PhDsp. 193
Incremental Income for MBAsp. 193
Rationale for Public Provisionp. 199
Natural Monopoliesp. 201
Externalitiesp. 202
Public Goodsp. 203
Asymmetric Information and Incomplete Marketsp. 205
Poverty Reductionp. 209
Merit Goodsp. 209
Distribution of Costs and Benefitsp. 210
Summaryp. 212
Technical Appendixp. 215
Discounting and Compounding Techniquesp. 215
The Mechanics of Discounting and Compoundingp. 216
Net Present Value Criterionp. 217
Internal Rate of Returnp. 217
Comparison of Mutually Exclusive Alternativesp. 219
Conceptual Frameworkp. 222
Traded Goodsp. 227
Nontraded, but Tradable Goodsp. 229
Nontradable Goodsp. 230
The Shadow Exchange Ratep. 231
Quantitative Restrictionsp. 235
The Opportunity Cost of Capitalp. 238
The Shadow Wage Ratep. 244
References and Bibliographyp. 247
Indexp. 259
Boxes
Mauritius Higher and Technical Education Projectp. 13
The With and Without Case: Vietnam Highway Rehabilitation Projectp. 19
Assessing Disposal Alternatives for Geothermal Wastewater in the Philippinesp. 65
Estimating the Downstream Costs of Soil Erosion in Chinap. 66
Using Dose-Response Relationships to Estimate Health Outcomes in Jakartap. 67
Valuing Life by Statistical Techniquesp. 68
Valuing Consumer Surplus of International Tourists in Madagascarp. 69
Evaluating the Cost-Effectiveness of School Inputs in the Philippinesp. 76
Evaluating School Amalgamation Options in Barbadosp. 88
Cost-Benefit Analysis of School Improvement Options in Brazilp. 89
Measuring Healthy Years of Life Gainedp. 109
Estimating the Value of Time in Brazilp. 129
Mexico-Probabilistic Risk Analysisp. 161
Shadow Price of Foreign Exchange in Indiap. 236
Opportunity Cost of Capital in Indonesia, 1992p. 243
Figures
With and Without Project Comparisonp. 18
Displacement and Addition Effectsp. 21
Measuring Consumer Surplusp. 34
Net Benefits Profile of a Projectp. 35
Private versus Social Costsp. 60
Table of Contents provided by Ingram. All Rights Reserved.

ISBN: 9780821348505
ISBN-10: 0821348507
Series: WBI Development Studies
Audience: Professional
Format: Paperback
Language: English
Number Of Pages: 296
Published: 5th February 2001
Publisher: World Bank Publications
Country of Publication: US
Dimensions (cm): 22.9 x 15.2  x 1.6
Weight (kg): 0.48