Project Evaluation and Uncertainty in Practice: A Statistical Analysis of Rate-of-Return Divergences of 1,015 World Bank Projects

Gerhard Pohl and Dubravko Mihaljek ()

The World Bank Economic Review, 1992, vol. 6, issue 2, 255-77

Abstract: This article analyzes the World Bank's experience with project evaluation for a sample of l,015 projects by comparing estimated rates of return at appraisal with reestimated rates of return when construction works are completed, usually 5 to 10 years after appraisal. The analysis highlights the high degree of uncertainty in project analysis. A wide range of variables has been introduced to explain the observed divergence in appraisal and reestimated rates of return, but only a relatively small part of the divergence can be explained, even with the benefit of hindsight. Project analysis thus has to cope with a large degree of uncertainty, which the traditional methods of project evaluation and selection have not been able to reduce. Copyright 1992 by Oxford University Press.

Date: 1992
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