Economic Analysis of Projects

by Professor Lyn Squire

A general approach to economic analysis of projects is presented, including the basic notions of cost-benefit analysis in the context of project analysis. A systematic and consistent estimation and application of shadow prices is needed, and suggestions are made for incorporating distributional effects, as well as the customary efficiency components, into shadow prices. Social rates of return can then be calculated, taking into account the distributional impact of various projects, an aspect ignored in the usual economic rates of return as derived from efficiency prices. Shadow prices are derived to reflect a wide range of economic conditions and value judgments concerning basic policy objectives pertaining to growth and distribution. Uncertainty, sensitivity, and risk must also be evaluated in project analysis. An appendix addresses the technical derivation of shadow prices.

166 pages, Hardcover

First published January 1, 1975

Reviews

[Elizabeth G · Rating 4 out of 5]

A foundational text in development economics that established the Squire-van der Tak methodology for project appraisal. Published by the World Bank in 1975, this slender volume synthesized and advanced cost-benefit analysis techniques for developing countries, introducing shadow pricing approaches that influenced decades of project evaluation. The authors present systematic methods for incorporating distributional effects alongside efficiency components, deriving social rates of return that account for equity impacts often ignored in conventional economic analysis. The technical appendix on shadow price derivation remains valuable for specialists. While subsequent research has refined these approaches, and the World Bank itself has moved toward broader evaluation frameworks, this work represents a crucial moment in the evolution of development economics. For historians of economic thought, development practitioners, and researchers tracing the intellectual history of project appraisal, this is essential primary source material. The prose is appropriately technical for its audience, and the 166-page length makes it accessible as a reference rather than a comprehensive textbook.