THE ROLE OF VALUE ADDED IN BENEFIT/COST ANALYSIS

Stephen C. Cooke

No 140522, A.E. Research Series from University of Idaho, Department of Agricultural Economics and Rural Sociology

Abstract: The problem is to determine the role of value added information in obtaining a measure of the benefits of public investment. Net benefit in a benefit/cost analysis is the change in economic surplus, i.e., the sum of the increase in consumer surplus and economic rent. An increase in productivity causes an increase in economic surplus. Thus, a productivity index is necessary but not sufficient information needed to measure the change in economic surplus. Information on value added can be used to establish productivity. Diewert's quadratic lemma is used to deduce an index of productivity as the difference between indexes of value added and its primary components in the context of a non-homothetic production function. It is concluded that this same procedure should be used to measure productivity in either a taut or a slack economy.

Keywords: Demand and Price Analysis; Industrial Organization; Productivity Analysis (search for similar items in EconPapers)
Pages: 22
Date: 1990-07
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/140522/files/ui-90-8.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:uidaer:140522

DOI: 10.22004/ag.econ.140522

Access Statistics for this paper

More papers in A.E. Research Series from University of Idaho, Department of Agricultural Economics and Rural Sociology Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().