This course covers the economic
aspects of cost-benefit analysis, and examines how an economic analysis fits
into other parts of the analysis. The analysis includes the financial,
economic, stakeholder and risk components. The emphasis will be on the use of
economic theory to measure the benefits and costs of projects. Applications to
infrastructure investments such as roads, satellite and electricity will be
discussed as well as investments in the social sectors such as education and
health. In addition, the course will cover the theory and measurement of the
economic opportunity cost of public funds, the economic cost of foreign
exchange and the measurement of the economic opportunity cost of labor. Both
the theoretical as well as the applied aspects of the field will be covered.
20% of your grade will be based on your performance in the
completion of the problem sets, and 80% will be determined by your performance
on the final exam.
The class will meet 1:00 pm to 4:00pm, Tuesdays and
Wednesdays from May 5 to June 10. Office hours will be 9:00 to 11:00am on
Wednesdays. There will normally be a tutorial at Dunning 10 from 4:00 to 6:00
pm.
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Class
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Lecture Notes
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Date
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Subject
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1
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May 5
(Tuesday)
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·
Harberger, A.C., Jenkins, G.P., and Kuo,
C.Y., “Chapter 1: The Integrated Analysis,” Cost-Benefit Analysis for
Investment Decisions, Queen’s University, Canada.
·
John Deutsch
International, Queen’s University, “RASCOM: Executive Summary of Project
Feasibility Study,” (October 2005).
Supplementary Reading
·
Jenkins, G.P., “Project
Analysis and the World Bank”, American Economic Review, (May 1997),
pp. 38-42.
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2
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May 6
(Wednesday)
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Principles
underlying the Economic Analysis of Projects
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Harberger, A.C., Jenkins, G.P., and Kuo,
C.Y., “Chapter 7: Principles Underlying the Economic Analysis of Projects,”
Cost-Benefit Analysis for Investment Decisions, Queen’s University, Canada,
(August 2008).
Supplementary Reading
·
Harberger,
A.C., “Three Basic Postulates for Applied Welfare Economics: An Interpretive
Essay”, Journal of Economic Literature,
vol. 9, issue 3, (September 1971), pp. 785-797.
Problem Set 1
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3
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May 12
(Tuesday)
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Alternative
Investment Criteria, Optimal Timing, Scale and Length of Project Life
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Harberger, A.C., Jenkins, G.P., and Kuo,
C.Y., “Chapter 4: Discounting and Alternative Investment Criteria,” Cost-Benefit
Analysis for Investment Decisions, Queen’s University, Canada, (July 2008).
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Harberger, A.C., Jenkins, G.P., and Kuo,
C.Y., “Chapter 5: Scale, Timing, Length and Inter-Dependencies in Project
Selection,” Cost-Benefit Analysis for Investment Decisions, Queen’s
University, Canada, (July 2008).
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4
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May 13
(Wednesday)
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The Economic Opportunity
Cost of Capital
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Harberger,
A.C., Jenkins, G.P. and Kuo, C.Y, “Chapter 8: The
Economic Opportunity Cost of Capital,”
Cost-Benefit Analysis for Investment Decisions, Queen’s University,
Canada, (March 2007).
·
Sjaastad, L.A. and Wisecarver,
D.L., “The Social Cost of Public Finance,” Journal of Political Economy,
Vol. 85, no. 3, (June 1977), pp.513-547.
Supplementary Reading
·
Kuo,
C. Y., Jenkins, G.P. and Mphahlele, M.P., “The
Economic Opportunity Cost of Capital for South Africa,” The South African Journal of Economics, Vol. 71:3, (September
2003), pp. 496-516.
Problem Set 2
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5
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May 19
(Tuesday)
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Integration of Movements in Prices, Inflation,
Exchange Rates and Impact of Inflation
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Jenkins, et al., “Chapter 4:
The Financial Analysis of a Project,” Integrated
Investment Appraisal: Concepts and Practice, (March 2005).
·
Harberger,
A.C., “Chapter 2: Survey of Literature on Cost-Benefit Analysis for
Industrial Project Evaluation,” Project
Evaluation: Collected Papers, University of Chicago Press, (1976), pp.
42-48.
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6
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May 20
(Wednesday)
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Measurement
of Economic Prices for Tradable and Non-Tradable Goods and Service
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Harberger, A.C., Jenkins, G.P. and Kuo,
C.Y, “Chapter 10: Economic Prices for Tradable Goods and Services,” Cost-Benefit Analysis for Investment
Decisions, Queen’s University, Canada, (August 2008).
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Harberger, A.C., Jenkins, G.P. and Kuo,
C.Y, “Chapter 11: Economic Prices for Non-Tradable Goods and Services,” Cost-Benefit Analysis for Investment
Decisions, Queen’s University, Canada, (August 2008).
·
Teaching Note:
“Estimation of Economic Prices for Traded Goods and Services,” Queen’s
University, Canada, (March 2007).
Problem Set 3
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7
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May 26
(Tuesday)
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Shadow
Price of Foreign Exchange and the Shadow Price of Non-Tradable Outlays
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Harberger,
A.C., Jenkins, G.P. and Kuo, C.Y, “Chapter 9: The
Shadow Price of Foreign Exchange and Non-Tradable Outlays,” Cost-Benefit Analysis for Investment
Decisions, Queen’s University, Canada, (August 2008).
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Harberger,
A.C., Jenkins, G.P., Kuo, C.Y. and Mphahlele, M.P., “The Economic Cost of Foreign Exchange
for South Africa,” The South African
Journal of Economics, Vol. 71:2, (June 2003), pp. 298-324.
Supplementary Reading
·
Harberger, A.C. and Jenkins, G.P. (edited),
“Introduction,” in Cost-Benefit Analysis, Edward Elgar Publishing
Limited, (2002).
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8
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May 27
(Wednesday)
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The
Economic Opportunity Cost of Labor
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Harberger,
A.C., Jenkins, G.P. and Kuo, C.Y., “Chapter 12: The
Economic Opportunity Cost of Labor,” Cost-Benefit
Analysis for Investment Decisions, Queen’s University, Canada, (February
2008).
Supplementary Reading
·
Bicak, H., Jenkins, G.P., Kuo,
C. Y., and Mphahlele, M.P., “An operational guide
to the Estimation of The Economic Opportunity Cost
of Labour in South Africa,” The South African Journal of Economics, Vol. 72:5, (December
2004).
Problem Set 4
Template
for Problem Set 4
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9
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June 2
(Tuesday)
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Evaluation of Stakeholder Impact and Basic Needs
Externalities
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Harberger,
A.C., Jenkins, G.P. and Kuo, C.Y, “Chapter 13:
Evaluation of Stakeholder Impacts,”
Cost-Benefit Analysis for Investment Decisions, Queen’s University,
Canada, (February 2008).
·
Jenkins, et al., “Chapter
14: Basic Needs Externalities”, Integrated
Investment Appraisal: Concepts and Practice, (March 2005).
Supplementary Reading
·
Harberger,
A.C., “Basic Needs Versus Distributional Weights in Social Cost-Benefit
Analysis,” Economic Development and
Cultural Change 32, no.3, (April 1984), pp. 455-74.
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10
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June 3
(Wednesday)
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Evaluation
of Transportation and Electricity Projects
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Harberger,
A.C., “Chapter 10: Cost-Benefit Analysis of Transportation Projects,” Project Evaluation: Collected Papers,
University of Chicago Press, (1976), pp. 248-279.
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Harberger,
A.C., “Chapter 9: Marginal Cost Pricing and Social Investment Criteria for
Electricity Undertaking,” Project
Evaluation: Collected Papers, University of Chicago Press, (1976), pp.
233-247.
·
Jenkins, G.P. and Kuo, C.Y, “Evaluation of the Benefits of Transnational
Transportation Projects,” Journal of Applied Economics, Vol IX, No. 1 (May 2006), 1-17.
Problem Set 5
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11
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June 9
(Tuesday)
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Evaluation
of Health and Education Projects
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Belli, et al., “Chapter 9:
Economic Evaluation of Health Projects,” Economic
Analysis of Investment Operations: Analytical Tools and Practical
Applications, WBI Development Studies, World Bank Institute, World Bank,
(2001).
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Jenkins, et al., “Chapter
13: Cost Effectiveness Analysis,” Integrated
Investment Appraisal: Concepts and Practice, (March 2005).
·
Belli, et al., “Chapter 8:
Economic Evaluation of Education Projects,” Economic Analysis of Investment Operations: Analytical Tools and
Practical Applications, WBI Development Studies, World Bank Institute,
World Bank, (2001).
Supplementary Reading
·
Belli, P., Khan, Q. and
Psacharopoulos, G., “Assessing a Higher Education
Project: A Mauritius Feasibility Study,” Applied
Economics, 31, (1999), pp. 27-35.
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Jimenez, E. and Patrinos, H.A., “Can Cost-Benefit Analysis Guide
Education Policy in Developing Countries”, World Bank, (March 2008).
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12
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June 10
(Wednesday)
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Risk Analysis and Evaluation of Regulations
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Viscusi, W.K., “Monetizing the Benefits of Risk and
Environment Regulation,” AEI-Brooking Joint Center for Regulatory Studies,
Working Paper 06-09, (April 2006).
·
Jenkins, G.P., Kuo, C.Y., and Ozbafli, A.,
Cost-Benefit Analysis Case Study on Regulations to Lower the Level of Sulphur in Gasoline,” paper prepared for Treasury Board,
Government of Canada, (March 2007).
·
Savvides, S., “Risk Analysis in Investment Appraisal,” Project
Appraisal, (March 1994), pp. 3-18.
Supplementary Reading
·
Treasury Board of
Canada Secretariat, “Canadian Cost-Benefit Analysis Guide: Regulatory
Proposals,” (2007).
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© Queen's Economics Department. All rights reserved.
URL: http://qed.econ.queensu.ca/faculty/kuog/
Last Modified: June 8, 2009
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