The economic evaluation of infrastructure investment. Some inescapable tradeoffs

Ginés de Rus

No 2014-16, Working Papers from FEDEA

Abstract: Infrastructure investment is an inter-temporal decision through which society foregoes its current wellbeing for the future. In the economic assessment of this trade-off, the practical standard method is cost-benefit analysis, which compares the social benefits and costs of the decision. Furthermore, a sound exercise of economic evaluation requires an approach that incorporates other unavoidable trade-offs related to pricing, such as charging short-run vs long-run marginal cost or the consequences of budget constraints on the net social value of the investment; intermodal competition and public investment; institutional design and the choice of contracts; and in a particularly important but somewhat neglected point, the long-term consequences of investment decisions. This paper addresses the economic content of this set of essential trade-offs and discusses their inclusion in the economic evaluation of major projects.

Date: 2014-10
New Economics Papers: this item is included in nep-ppm, nep-reg and nep-tre
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