2018. September 12. 11:46

Methodological Challenges in Cost-Benefit Analysis

Tünde Vörös
assistant lecturer
Széchenyi István University, Győr

Published in: Public Finance Quarterly 2018/3. (p. 402-423.)

Summary: The aim of the study is to examine the theoretical and methodological challenges of cost-benefit analysis in the light of practical application. After a short overview of the development of cost-benefit analysis, the author seeks to examine the methodological problems of the analyses applied in the case of public projects in the course of decision-making at social level. The study analyses, inter alia, the problem of the multiple counting of benefits, the uncertainty of the applied estimates, the determination of the value of the social discount rate, the consideration of the social cost of public funds and the role of cost-benefit analysis in practical decision-making. In relation to the methodology of Hungarian cost-benefit analyses, the study puts forward two concrete proposals. Based on calculations, the study estimates the fiscal correction factor of labour costs (0.2851), and points out the fact that in the case of the effects emerging in secondary markets, the use of the multipliers observed in the Hungarian practice cannot be regarded as an economically adequate instrument.

Keywords: cost-benefit analysis, project appraisal, social welfare, externalities, social discount rate

JEL codes: D61, D62, D71, H43

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