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February 25, 2007 | Publications, Books | By MG

Cost-Benefit Analysis and Incentives in Evaluation

The Structural Funds of European Union, Edward Elgar, 2007, edited by Massimo Florio

This book provides an authoritative contribution to applied cost–benefit analysis (CBA) and other evaluation methods in the context of the regional policy of the European Union. Through the use of Structural Funds and other financial and regulatory mechanisms, the EU will help to promote thousands of infrastructure projects in the next decade. CBA will be a key ingredient in the investment decision process and the authors provide important insights from their international experiences in project appraisal and evaluation and point to some valuable lessons to be learnt for the future.

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“The critical issue is ‘‘asymmetric information’’ among the participating actors. Without solving the problems of information availability and accessibility to actors, it will be hard to unite different objectives of the actors and establish a shared base for assessment models. The book makes a valuable contribution to the discussion of these issues, but setting the priorities and criteria for project implementation and programme appraisal and evaluation (ex ante and ex post) still remains an important challenge for the European Commission.”

Süleyman Çelik, Gazi University – Journal of Comparative Policy Analysis, March 2009, Vol. 11(1): 160-161.

“This book of essays ‘Cost- Benefit Analysis and Incentives in Evaluation’ edited by Massimo Florio has a twofold objective. While it explicitly focuses on the reduction of moral hazard on the part of the European Union member states in using cost-benefit analysis (CBA), and in doing so proposes application of the incentive policy (à la Laffont and Tirole), it also investigates the reasons why CBA is declining as an evaluation tool. The decline is due to the entry onto the economic policy scene of monetarism as expounded by Friedman and, later, Barro, Lucas, Kydland and Prescott, with their critique of any type of public intervention. The authors rediscover the reasons for economic CBA evaluation, particularly for infrastructure projects (but it can readily be extended to environmental, education, cultural, research and innovation projects). Under scrutiny are concepts such as the discount rate, income distribution and the social welfare function.”

Paolo Leon,  Università degli Studi di Roma 3 – QA

“In view of both the renewed interest in CBA created by the EU cohesion policy and the novel challenging issues that it raises, the volume edited by professor Florio makes a worthwhile contribution to applied welfare economics. The book will be especially welcomed by practitioners in investment planning and evaluation. Some of the questions it raises will likely stimulate further research by theory-oriented scholars in public economics.”

Giacomo Corneo, Free University of Berlin – Journal of Economics (2008)

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