Cost Benefit Analysis of Investment Projects, based on Inter-Industry Models

  • Anton KOGAN Faculty of Economics, Management and Humanitarian Education, Novosibirsk State University of Architecture and Construction (Sibstrin)

Abstract

This paper offers solution to some problems of cost benefit analysis. Guides to cost benefit analysis require calculating externalities of an appraised project, but don't discuss universal models and calculation methods. The author suggests that inter-industry models should be used to appraise externalities, with positive externalities being full benefits of the economy and negative externalities being full costs of the economy. Factors of full material costs are used for calculation. Thus, the depth and accuracy of cost benefit analysis (CBA) is increased, with the share of subjectivism in such appraisal being reduced. It is not required to use the conversion factor to change prices of inputs and outputs.
The economic efficiency is appraised on the basis of ‘the index of specific value growth speed’ (IS) developed by the author. The author proves that only IS (but not net present value) makes it possible to compare the efficiency of alternative projects with different investment amounts, calculation periods and annual results.

References

[1] European Commission. 2008. Guide to Cost Benefit Analysis of Investment Projects, DG Regional Policy.
[2] Eurostat. 2008. Eurostat Manual of Supply, Use and Input-Output Tables, Methodological and Working Paper.
[3] Kogan, Anton. 2014. A New Way to Increase the Company Value. Middle East Journal of Scientific Research. 21(9):1605-1610, DOI: 10.5829/idosi.mejsr.2014.21.09.21741.
[4] Kogan, Anton. 2014. The Criticism of Net Present Value and Equivalent Annual Cost, Journal of Advanced Research in Law and Economics, (Volume V, Summer), 1(9): 15 – 22, doi: 10.14505/jarle.v5.1(9).02.
[5] Kogan, Anton. 2015. Basis of the Choice of Optimal Characteristics for Innovative Equipment. International Journal of Applied Engineering Research. 10(3): 6013-6018.
[6] United Nations. 1999. Handbook of Input-Output Table Compilation and Analysis. Studies in Methods, Series F, No. 74, New York.
[7] World Road Association (PIARC). 2012. State of the Practice for Cost-effectiveness Analysis (CEA), Cost- Benefit analysis (CBA) and resource allocation.
Published
2016-11-24
How to Cite
KOGAN, Anton. Cost Benefit Analysis of Investment Projects, based on Inter-Industry Models. Journal of Advanced Research in Law and Economics, [S.l.], v. 6, n. 1, p. 112-120, nov. 2016. ISSN 2068-696X. Available at: <https://journals.aserspublishing.eu/jarle/article/view/442>. Date accessed: 14 apr. 2024.
Section
Journal of Advanced Research in Law and Economics

Keywords

cost benefit analysis; economic efficiency appraisal; inter-industry models