Forget the Weights, Who gets the Benefits? How to Bring a Poverty Focus to the Economic Analysis of Projects

Abstract

This paper examines the way in which the distributional impact of projects has been treated in the cost±bene®t analysis literature. It is suggested that excessive emphasis has been given to the estimation of distribution weights in the context of single ®gure measures of project worth and that more attention should be paid to estimation of the distribution e ects themselves. If projects really are to have some impact on poverty it is important that some attempt is made to measure what that impact is. Such an attempt requires both systematic measurement of direct income e ects as well as the possibility of measuring indirect e ects where these are expected to be important. An approach is suggested in which direct measurement of income e ects can be adjusted using shadow price estimates to determine indirect income e ects. The approach is illustrated with the example of a district heating project in the Republic of Latvia.