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Economic Analysis and Investment Priorities in Sweden's Transport Sector
Toulouse School of Economics, University of Toulouse Capitole, Toulouse, France.
Örebro University, Örebro University School of Business.ORCID iD: 0000-0003-1172-1076
The Institute of Transport Economics, Oslo, Norway.
Swedish National Road and Transport Research Institute (VTI), Stockholm, Sweden; Centre for Transport Studies, KTH, Sweden .
2018 (English)In: Journal of Benefit-Cost Analysis, ISSN 2194-5888, E-ISSN 2152-2812, Vol. 9, no 1, p. 120-146Article in journal (Refereed) Published
Abstract [en]

Beginning as a planning tool within Sweden's national road administration some 50 years ago, benefit-cost analysis (BCA) has come to be a pillar of the national transport policy because of subsequent strategic choices made by the national parliament. These choices made it necessary to widen the analysis of costs to include also externalities and a foregone conclusion was that efficient investment priorities should be made based on BCA. But no one asked whether the political decision makers or the BCA models were up to that task. This paper reviews the institutional framework and practice of BCA in Sweden for transport infrastructure investment, and considers design issues that have been and still are debated, such as whether the discount rate should include a risk term and how to account for the marginal cost of public funds. A main concern with BCA results is the underestimation of construction costs, making transport sector projects look better than they are. Several ex post analyses have established that a higher NPV ratio increases the probability of being included in the investment program proposal prepared by the agency. The requirement to let projects undergo BCA seems to make planners trim project proposals by trying to reduce investment costs without significantly reducing benefits. This relationship is weaker among profitable projects. Moreover, there is no correlation between rate of return and the probability of being included in the final program, which is established on political grounds.

Place, publisher, year, edition, pages
Cambridge University Press, 2018. Vol. 9, no 1, p. 120-146
Keywords [en]
benefit-cost analysis, rail, road, Sweden, transport sector institutions
National Category
Economics
Identifiers
URN: urn:nbn:se:oru:diva-66992DOI: 10.1017/bca.2018.3ISI: 000431405400006OAI: oai:DiVA.org:oru-66992DiVA, id: diva2:1206978
Note

Funding Agencies:

VTI  

Centre for Transport Studies, Stockholm 

Available from: 2018-05-18 Created: 2018-05-18 Last updated: 2018-08-31Bibliographically approved

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Hultkrantz, Lars

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  • apa
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