I contribute to the literature on the growth of public spending in Western economies with a novel mechanism that ties it to the marketization process, i.e. the substitution of home with market production. I argue that a key contributor to the expansion of social spending is the replacement of family-based transfers with public pensions and other public transfer programs. I provide empirical support for this hypothesis by establishing the long-run relationship between government size and marketization, alongside other established determinants of government spending, in a panel of Western economies. I then illustrate a potential mechanism behind the results with a theoretical model in which, as a result of the productivity advantage of the market over the home sector, family-based intergenerational transfers decline unexpectedly, providing a rationale for government intervention in the form of public pensions with a poverty relief component.

The so-called Flyvbjerg database is the largest source of data on the performance of major investment projects. It has generated influential analyses of the magnitude of and reasons for cost overruns and demand shortfalls in major projects. Those analyses have demonstrated, among other things, the systematic presence of large forecast errors in both construction costs and in user demand in the first year of operation. They have also linked those results to the social welfare consequences of the underlying projects, suggesting that the large and systematic forecast errors are indicative of welfare destruction. Given how influential those analyses have been, this paper examines the link between the database, empirical analyses thereof, and social benefit–cost analysis (BCA). To that end, both the measurement of variables in the database and the estimation of forecast errors are contrasted against BCA. The conditions for the estimated forecast errors to approximate those obtained from a BCA are spelled out, and the scope for drawing welfare conclusions based on those estimates is discussed. Furthermore, numerical simulations are presented to explore whether the estimated forecast errors do indeed imply likely welfare destruction. The simulations suggest that as large as the forecast errors are, welfare destruction is no foregone conclusion.

Both Republican and Democratic administrations make regulatory and funding decisions with close reference to benefit–cost analysis (BCA). With respect to regulation, there has been a great deal of academic discussion of BCA and its limits, but almost no attention has been paid to the role of BCA in government funding. That is a serious gap, not least in connection with climate-related risks, such as wildfire, drought, extreme heat, and flooding. Office of Management and Budget (OMB) Circular A-94 sets out guidelines for the BCA required when people are applying to many federal discretionary grant programs. Through Circular A-94, OMB has long required applicants to demonstrate that the benefits of their projects would exceed the costs. But under Circular A-94 as it stood for many years, efficiency-based BCA could produce results that fail to maximize welfare and that are also highly inequitable. The 2023 revision of Circular A-94 focuses more directly on welfare and equity, which are now – not uncontroversially – being brought directly into policy. At the same time, the new Circular A-94 raises fresh questions about how best to promote welfare, and to consider equity, in practice. This article explains the economic foundations for promoting welfare through distributional weighting – and how the old BCA guidance fell short. It then offers recommendations on how to operationalize distributional weighting on the ground specifically for government spending programs – and for BCA more broadly.

The literature on the impacts of transport corridors points to a tradeoff between income and environmental quality. We estimate the impacts of India's Golden Quadrilateral and North-South-East-West highways on income and environmental quality to test this tradeoff hypothesis. Applying the difference-in-difference method to district level data, we find that the highways increased both local income and particulate matter air pollution. The estimated increase in air pollution is robust to using an instrumental variables approach, while that in income is not. Examining heterogeneity in these impacts, we find that the income–environment tradeoff was less steep in districts with initially higher educational attainment rates because they experienced a smaller increase in air pollution due to the highways.

The prospects are considered of deploying batteries and fuel cells in order to reduce the carbon emissions from various modes of transport. It is proposed that the government has not done enough to advance these technologies and that Britain is lagging behind other countries. The adequacy of Britain’s future supplies of energy is called into question.

Sri Lanka has a history of successfully managing communicable diseases by utilising its extensive public healthcare network of community clinics and public hospitals. This article makes use of Job Demands-Resources theory (JD-R) to examine the impact of COVID-19 on nurses’ working conditions in public and private hospitals in Sri Lanka. Prior to the COVID-19 pandemic, nurses’ job demands on public hospital wards included long working hours, limited workplace autonomy, minimal medical resources and high workloads caused by understaffing. Private hospital nurses experienced pressure from patients and their families to provide them with discounts on medical bills. Nurses allocated to work on COVID-19 wards experienced additional physical job demands from wearing personal protective equipment (PPE) for lengthy periods on hospital wards in a humid climate. Nurses on COVID-19 wards also experienced increased anxiety that they could transmit the disease to family members. While nurses experienced job resources such as social support from nursing supervisors and other nurses, they reported receiving minimal training in the provision of healthcare to COVID-19 patients. This combination of high job demands and low job resources increased the levels of exhaustion and mental distress experienced by many nurses working on COVID-19 hospital wards.

Viruses and related graft-transmissible pathogens cause diseases that cost the grape industry billions of dollars annually if left uncontrolled. The National Clean Plant Network (NCPN), a USDA Farm Bill program, is an organization of clean plant centers that produce and maintain virus-tested foundation vine stocks and distribute propagation material derived thereof to nurseries and growers to minimize the introduction of viruses and virus-like diseases into the vineyard. Foundation Plant Services (FPS) is the major NCPN-grapes center. We examined the economic impacts of public investments in FPS from 2006 to 2019. By focusing on grapevine leafroll disease, our analyses revealed a benefit-cost ratio ranging from 22:1 to 96:1, with a 5% and a 20% disease infection rates in commercial vineyards, respectively. A welfare analysis was consistent with grape growers and nurseries capturing most (64–98%) of the benefits from adopting clean planting material compared with winemakers and other actors in the downstream wine supply chain system. This study provided new insights into the returns to public investments in a clean plant center and documented strong financial incentives for higher adoption of clean vines derived from virus-tested stocks, while justifying continued support of NCPN centers from public and private sectors.

This article describes the process from first proposals in the early 1990s to project completion many years later for seven large Swedish road and railway projects. The purpose is to find reasons for the massive cost overruns as well as explanations for why projects are brought to completion despite much higher costs than when the decision to build was made. Cost overruns are set in an institutional context to highlight the interplay among national, regional, and local policymakers. National investment programs are seen as promises by other parts of society, irrespective of whether project costs increase during the process toward procurement and implementation. Another aspect is that the infrastructure manager’s administrative framework currently makes it impossible to compare costs in contracts with final cost, meaning that there is no institutionalized learning process in place. Design preparations and the estimation of costs for new projects must therefore be done without an understanding of what has been working well in the implementation of previous projects. While Benefit-Cost Analysis (BCA) played no role in the planning of the seven projects, the article sends a stark warning that early cost estimates provide poor input for assessing project rate of return.

This paper aims to estimate the government investment fiscal multipliers in select European countries for the period 1970–2016. To do this, we combine Structural Vector Autoregression (SVAR) modeling with the Local Projections (LP) approach. We estimate models by also controlling for fiscal foresight, excluding the postcrisis period and distinguishing between Northern and Southern countries. Our findings suggest that an increase in government investment generates a “Keynesian effect” by engendering positive and permanent effects on the GDP level, even when government expenditure expectations are considered. Fiscal multipliers are close to 1 on impact and increase in the years after the implementation of a discretionary fiscal policy.

Most cost-benefit analyses assume that the estimates of costs and benefits are more or less accurate and unbiased. But what if, in reality, estimates are highly inaccurate and biased? Then the assumption that cost-benefit analysis is a rational way to improve resource allocation would be a fallacy. Based on the largest dataset of its kind, we test the assumption that cost and benefit estimates of public investments are accurate and unbiased. We find this is not the case with overwhelming statistical significance. We document the extent of cost overruns, benefit shortfalls, and forecasting bias in public investments. We further assess whether such inaccuracies seriously distort effective resource allocation, which is found to be the case. We explain our findings in behavioral terms and explore their policy implications. Finally, we conclude that cost-benefit analysis of public investments stands in need of reform and we outline four steps to such reform.

The idea of assessing the costs and benefits of public and private projects is not new to Europe, dating back to studies at the Ecole des Ponts et Chaussees (Paris) in the XIX century. Later on, in the last century, Benefit-Cost Analysis (BCA) in its current form has been more extensively used in the United States than in Europe. In the last two decades, however, there has been a rapid increase in its use in a number of European countries and at the European Union (EU) level. European governments often undertake tasks that would be done by private companies in the United States, such as the provision of transport, energy, water and waste management, health services, etc. In the United States the focus of BCA has often been regulatory impact analysis, rather than public project evaluation. One might, therefore, expect that Europeans might approach some things differently from their American counterparts and that new insights might result from these efforts. The articles in this symposium, taken from the recent European Society for Benefit-Cost Analysis (SBCA) conference in Toulouse, illustrate some of these differences and some converging themes.

Biodiversity points are a quantitative measure for biodiversity. For over a decade, biodiversity points are being applied in the Netherlands for measuring the impact of roads, enclosure dams, and other water management projects on the non-use value of biodiversity. Biodiversity points are quite similar to the quality-adjusted life years used for cost-effectiveness analysis of healthcare treatments. Biodiversity points can be calculated by multiplying the size of the ecotope (e.g., number of hectare), the ecological quality of the ecotope (0–100 %), and the ecological scarcity of each type of ecotope. For many infrastructure projects, the impact on the non-use value of biodiversity can be a principal purpose or a major co-benefit or trade-off, for example, for a park, a fish sluice, a road, an ecoduct, an enclosure dam, or a marine protected area. Biodiversity points are a simple, transparent, and standardized way to aggregate and quantify the qualitative or ordinal assessments by ecological experts. For measuring the non-use value of biodiversity, they are also more informative than valuation by revealed or stated preferences methods. This paper provides the first overview of the application of this method in the Dutch practice of cost–benefit analysis. It also discusses its merits and limitations. The calculation and use of biodiversity points are illustrated by four case studies.

This paper investigates the role of cost-benefit analysis (CBA) in the context of the European Union (EU) Cohesion Policy. After presenting the EU policy framework and the CBA guidelines adopted by the European Commission, we perform an empirical analysis drawing from a dataset of around 1000 major project applications, submitted during the period 2007–2013 by 22 European countries, and representing almost €180 billion of investment. A distinctive feature of the current CBA approach adopted by the European Commission is that applications for funding must provide a forecast of both the project’s financial rate of return (FRR) and economic rate of return (ERR). While the former represents the financial profitability of the project from a private investors’ perspective, the latter reveals its socio-economic benefits for the whole society. The difference between ERR and FRR mainly depends on the use of shadow prices, the inclusion of externalities and other nonmarket effects in the estimation of ERR, whilst the FRR is based on market prices. We find that, on average, the FRR is slightly negative ($-2.9$%) and the ERR is positive (16.2%). ERR and FRR are positively correlated on average with differences across sectors. We discuss these findings and suggest further research needs.

Beginning as a planning tool within Sweden’s national road administration some 50 years ago, benefit-cost analysis (BCA) has come to be a pillar of the national transport policy because of subsequent strategic choices made by the national parliament. These choices made it necessary to widen the analysis of costs to include also externalities and a foregone conclusion was that efficient investment priorities should be made based on BCA. But no one asked whether the political decision makers or the BCA models were up to that task. This paper reviews the institutional framework and practice of BCA in Sweden for transport infrastructure investment, and considers design issues that have been and still are debated, such as whether the discount rate should include a risk term and how to account for the marginal cost of public funds. A main concern with BCA results is the underestimation of construction costs, making transport sector projects look better than they are. Several ex post analyses have established that a higher NPV ratio increases the probability of being included in the investment program proposal prepared by the agency. The requirement to let projects undergo BCA seems to make planners “trim” project proposals by trying to reduce investment costs without significantly reducing benefits. This relationship is weaker among profitable projects. Moreover, there is no correlation between rate of return and the probability of being included in the final program, which is established on political grounds.

In 1991, the Intermodal Surface Transportation Efficiency Act (ISTEA) changed the federal-state transportation relationship by devolving decision making to the states. In turn, states were required to work with local officials on transportation improvements. ISTEA was authorized for 1992–1997, and the Transportation Equity Act for the 21st Century continued ISTEA policies through 2003. Changes in road and bridge conditions in the rural south are examined under these new transportation policies. Federal funding trends are detailed with state funding. Overall condition of roads and bridges eligible for federal funding improved, traffic increased on all roads, but condition disparities between local roads and federally funded roads grew.

This essay examines the opportunity of erecting a national electricity network before 1936. Regional markets were created by coordinating electricity networks in France, Switzerland and Great Britain during the twenties. In Spain, a review of technical journals indicates that this issue had become significant in the nationalistic economic policy environment of the inter-war period. The Spanish Government made several attempts at setting up a national electricity grid through public tenders. However, none of the projects succeeded and the development of an electricity-grid was left to private firms' initiative and the network did not achieve a national coverage until the 1980s. Seen from the standpoint of the 1930s, the high investment costs the interconnection required rendered this project unfeasible. As a matter of fact, a national-grid may not have represented an alternative to dam-building in order to improve the efficiency of the Spanish electrical system.