Pakistan Institute of Development Economics



Towards a Synthesis of Semi-Input-Output and Little-Mirrlees: A Social Cost-Benefit Analysis with Multiplier Effects of An Irrigation Project in Northwest Malaysia

An investment project has effects on the incomes of households, firms and government , not only directly through the value added produced by the project it9Cif, but also by inducing additional output through inter-industry linkages and expenditures out of the extra incomes accruing to its beneficiaries. The latter, sometimes called the “multiplier” or “downstream” effects of a project , have been discussed in some of the recent literature on social cost benefit analysis [6, II]. These contributions have been concerned with the “multiplier” or “downstream” effects of projects, and with the derivation of shadow prices which capture all such effects in full. If these shadow prices are correctly calculated, so it is asserted, then valuing a project ‘s direct inputs and outputs at these prices yields the right measure of its social profitability . This approach is in the spirit of, and consistent with , that of the various manuals on social cost• benefit analysis [9. 13, 16] .

Clive Bell, Siiantayanan Devarajan

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