The authors focus on two ...

The authors focus on two broad questions: 1) what is the proper role for project evaluation in today's world, where countries have reduced major economic distortions and are reconsidering the role of the state? and 2) besides project evaluation, how else can economic analysis ensure high-quality projects? The authors argue for a shift in the emphasis of project evaluation away from a concern with precise rate of return calculations to a broader examination of the rationale for public provision. In this context, three areas critical for proper project appraisal are the counterfactual private sector supply response, the fiscal impact, and the fungibility of lending. (1) Counterfactual private sector supply response. Any type of cost-benefit analysis - be it in the public or the private sector - requires the project evaluator to specify the counterfactual: what would the world have looked like in the absence of the project? Since World Bank projects are public sector projects, the relevant counterfactual involves assessing what the private sector would have otherwise provided, and the relevant magnitude for evaluation purposes is the net contribution of the public project. Failure to consider explicitly the private sector counterfactual during evaluation biases the lending mix of the Bank away from projects with strong public good characteristics toward projects with private good characteristics. (2) Fiscal impact. Applying the private sector couterfactual would lead the Bank to undertake projects with a reasonable case for public intervention, such as basic infrastructure, primary education, and rural health. These projects typically share the characteristics that costs are borne by the public sector while benefits are enjoyed by the private sector. But in the absence of nondistortionary, lump sum taxes, there is likely to be a positive marginal cost of taxation and a premium on public income. Since the Bank has not used such a premium and treats public costs and private benefits equally, it has systematically overestimated the net benefits of these projects. (3) Fungibility of lending. Project-specific appraisal can at best assess only the rate of return and the acceptability of the project being appraised. This limitation is problematic because the project might have been undertaken even without Bank financing. If that is the case, the Bank is actually financing some other project - one not subject to appraisal by the Bank - that would not have been in the investment program without Bank financing. This problem arises because financial resources are fungible to some extent. One way to alleviate this concern is to conduct public expenditure reviews before embarking on the appraisal and financing of specific projects. Furthermore, financing a portion of the government's sectoral investment program may be more effective than project-specific lending.

This paper makes the case for the systematic appraisal of public sector projects using shadow prices as the signals of social scarcities. In so doing, it attempts to redress the balance between estimating inputs and outputs, central though that task is, and valuing them correctly. The account of how to estimate shadow prices for this purpose pays particular attention to the social discount rate and how to treat uncertainty at both the project and economy-wide levels. There follows an illustration of the ideas and apparatus in practice using an evaluation of India's large rural roads programme (PMGSY) in connection with a World Bank loan. A discussion of the more general uses of shadow prices in evaluating decisions in the public sector is complemented by a series of proposals for the implementation of systematic procedures for project appraisal in government and international donors.

This books presents general principles and methodologies of quantitative risk analysis; provides theory and practice of how to evaluate health, transport and education projects and describes how to assess the environmental impact of projects. It looks at how the tools of cost benefit analysis can be applied from the point of view of the private sector, public sector, bankers, and the country as a whole. It encourages analysts to answer a number of key questions that are likely to increase success rather than simply describing techniques. This book as aimed at all concerned with resource allocation and is presented in an accessible fashion. It is required reading at World bank Institute courses.

Content Description #Includes bibliographical references.

Involuntary Resettlement Sourcebook: Planning and Implementation in Development Projects clarifies many policy and technical issues that confront resettlement policymakers and practitioners. It provides guidance on resettlement design, implementation, and monitoring, and it discusses resettlement issues particular to development projects in different sectors, such as urban development, natural resource management, and the building of dams. The sourcebook will be useful to a wide range of stakeholders. Its primary audience is resettlement practitioners, who have a role in the actual design, implementation, and evaluation of resettlement programs. The sourcebook will also be of interest to policymakers and project decision makers.