Jump to ContentJump to Main Navigation
Show Summary Details
More options …

Journal of Benefit-Cost Analysis

Online
ISSN
2152-2812
See all formats and pricing
More options …

Indirect Effects in Cost-Benefit Analysis

Jan Rouwendal
Published Online: 2012-01-25 | DOI: https://doi.org/10.1515/2152-2812.1046

The debate about the effectiveness of investments in public infrastructure initiated by Aschauer suggests that there may be substantial discrepancies between the results of conventional cost-benefit analysis and the ultimate effects of such investments on welfare. This paper takes a closer look at this issue by investigating the existence of secondary or indirect effects under conditions of monopolistic competition. We find that such effects will in general exist, and that they are potentially large, but that they can also be negative, depending on the specification of the model. With linear demand curves, indirect effects can be positive, zero or negative, with Dixit-Stiglitz they are always nonnegative and closely related to the taste for diversity, while with the logit model they are always identically zero. Free entry reinforces the positive indirect effects in the Dixit-Stiglitz model, and causes negative indirect effects in the logit model. Given this variety of results, robust empirical measurement of the indirect effects appears to be difficult.

Keywords: project evaluation; indirect (or secondary) effects; monopolistic competition

About the article

Published Online: 2012-01-25


Citation Information: Journal of Benefit-Cost Analysis, ISSN (Online) 2152-2812, DOI: https://doi.org/10.1515/2152-2812.1046.

Export Citation

©2012 Walter de Gruyter GmbH & Co. KG, Berlin/Boston. Copyright Clearance Center

Citing Articles

Here you can find all Crossref-listed publications in which this article is cited. If you would like to receive automatic email messages as soon as this article is cited in other publications, simply activate the “Citation Alert” on the top of this page.

[1]
James Laird, Chris Nash, and Peter Mackie
Town Planning Review, 2014, Volume 85, Number 6, Page 709
[2]
Yoshitsugu Kanemoto
Economics of Transportation, 2013, Volume 2, Number 2-3, Page 53

Comments (0)

Please log in or register to comment.
Log in