Fiscal Reform - Cost-Benefit Analysis

Cost-Benefit Analysis

This page is dedicated to the study of cost-benefit analysis (CBA) and cost-effectiveness analysis (CEA) and their application to investment decisions, with particular emphasis on project appraisal in the public sector. Presentations, documents, and reference materials from past as well as upcoming trainings are provided on this page for visitors' convenience. This page is designed to be of particular use to USAID officers in understanding and deepening their knowledge of CBA / CEA for project design and evaluation.

Materials are continually added to this page. We encourage you to visit regularly.

Past Training Programs

Introduction to Applied Cost-Benefit and Cost-Effectivenes Analysis - June 28 - July 23, 2010 - Duke University, Durham, NC

Lead Lecturer: Prof. Joseph Tham, Duke University

Summary: Using practical case studies, this four-week intensive training program presented the basic principles of Applied Cost-benefit Analysis (CBA) and Cost-Effectiveness Analysis (CEA) for project design, selection, and evaluation. Click the link above for more information on the program.

Introduction to Cost-Benefit Analysis

Lead lecturer: Prof. Arnold C. Harberger, UCLA

Case studies: Mr. Barry Deren, MCC

USAID/EGAT's Office of Economic Growth sponsored this introductory course on Cost-Benefit Analysis (CBA) for USAID officers in December 2008. The course provides an orientation to CBA principles and their application in designing donor-funded projects and in determining which projects and programs to undertake. The course was led by USAID’s chief economic advisor and preeminent economist, Professor Arnold C. Harberger (UCLA). Mr. Barry Deren of the Millennium Challenge Corporation presented several case studies of real-world project appraisals.

Dr. Harberger's lecture notes and two case studies presented by Mr. Deren are available for download.

Introduction to Cost-Benefit Analysis for USAID Officers

Lead lecturer: Dr. Richard Harber

Case studies: Dr. Mark Gallagher (DAI), Paul Mulligan (USAID/I&E), Theresa Osborne (MCC)

USAID/EGAT's Office of Economic Growth again sponsored its introductory course on Cost-Benefit Analysis (CBA) for USAID officers in September and again in December 2009. The course, led by former USAID economist Dr. Richard Harber, provides an overview of the theory and mechanics of conducting cost-benefit analysis of projects, particularly in the USAID context. The course addresses the project cycle, from project design and appraisal, to project implementation and ex-post evaluation, reinforcing the differences between private and public investment projects, and introducing different approaches to identifying, estimating and valuing economic costs and benefits.

Course materials are available for download. These include several PowerPoint presentations as well as group exercises that allow users to construct a simulated cost-benefit analysis for hypothetical USAID projects, including projects in the roads, agriculture and water sectors.

Selected reading

Cost-Benefit Analysis for Investment Decisions

Author(s): Arnold C. Harberger and Glenn P. Jenkins

This manual, designed to introduce readers to cost-benefit analysis, is a "must read" for anyone engaged in the design or appraisal of public sector and/or donor-supported projects and programs. The manual is intended give readers a solid understanding of what is involved in carrying out economic evaluations of real-world projects.

The Project Practitioners' Appraisal Guidebook

Author(s): USAID/India State Fiscal Management Reform Project

This Project Appraisal Guidebook was produced under USAID/India's State Fiscal Management Reform Project. The purpose of the Guidebook is to help state governments develop and evaluate investment projects to promote economic and social well-being. However, the material is also relevant and broadly applicable to the design and evaluation of projects conceived and implemented with assistance from donors, such as USAID. The Guidebook describes how public sector investments should be evaluated so that they may be taken from the idea stage to the implementation phase. These themes are addressed under three headings: financial, economic, and distributional analysis of a project. By their very nature, investment projects involve benefits and costs over a number of years into the future. Market prices and project outcomes cannot be predicted with certainty. In addition, technical difficulties and delays in implementation frequently result in cost and time overruns. Given this uncertainty, account must be taken of a project’s risks and the costs that these risks create. Therefore, risk analysis, and how to reduce and manage risk through the use of contracting and other risk mitigation methods, constitutes the fourth Section of this Guidebook.