Maximizing, measuring, and not double counting transportation-improvement benefits: A primer on closed- and open-economy cost-benefit analysis

Herbert Mohring

Transportation Research Part B: Methodological, 1993, vol. 27, issue 6, 413-424

Abstract: In a "closed-economy" cost-benefit analysis of a public investment, all affected economic agents matter. In such an analysis, if price equals marginal cost in all affected markets, accurately measuring benefits requires looking only at the use made of the improvement; "non-user" costs and benefits cancel out. Only if price is unequal to marginal cost in affected markets do unduplicated net nonuser benefits and costs exist. In an "open-economy" cost-benefit analysis, gains and losses to outsiders are ignored. The nature of nonuser insider benefits, particularly from "job-creation", is discussed.

Date: 1993
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