Identifying an Australian 'Shadow' Benefit / Cost Ratio for Public Projects

Craig Lawrence

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines the social opportunity cost of a hypothetical public project in Australia and compares these values with the cost of the project as measured by factor prices. Since 2001, the Australian taxation system has included an ad valorem tax, the Goods and Services Tax, however relatively little analysis of the impact of this tax on public project evaluation methods has been undertaken. This tax creates divergences between social opportunity cost and conventional cost measures. Therefore it is recommended that shadow prices be applied to pubic projects. Following Campbell (1975), a shadow price can be introduced into Australian project evaluation in the form of a cut-off benefit cost ratio. The calculations reported on in the paper indicate that this ratio lies between 1 and 1.3 for public projects in Australia.

Keywords: allocative efficiency; cost benefit analysis; efficiency; optimal taxation; project evaluation; social discount rate (search for similar items in EconPapers)
JEL-codes: D61 H21 H43 (search for similar items in EconPapers)
Date: 2009-02-11
New Economics Papers: this item is included in nep-pbe and nep-ppm
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Related works:
Working Paper: Identifying an Australian ‘Shadow’ Benefit / Cost Ratio for Public Projects (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:13336

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