economic evaluation tools by Muqeem ul Islam ADS NSPP NIM

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Lecture Delivered in MCMC courses at National School of Public Policy National Institute of Management Peshawar, Pakistan It contains description of essential economic tools required for public policy evaluation and policy framing

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PowerPoint Presentation:

Economic Tools Muqeem ul Islam Additional Directing Staff, NIM National School of Public Policy for Policy/Project Evaluation

Policy Making Process ?:

Policy Making Process ?

PowerPoint Presentation:

Vision Policy formulation process Policies/ Intervention Tools Programmes Projects Use of Humanity’s Knowledge base Alternative Schools of thoughts Analysis Research/Technical Analysis Cost Benefit Analysis Expert Opinion Technocrats’ views Choices between alternate options Consensus making process Policy formulation process Wisdom Information / Data Knowledge Theories Analytical Framework

Economic Evaluation Tools:

Economic Evaluation Tools Demand-Supply Analysis Benefit-Cost Analysis Cost Effectiveness Analysis Financial Analysis/Feasibility Fiscal Impact Analysis Economic Impact Analysis Social/Environmental Impact Analysis

Why we learn these techniques ?:

Why we learn these techniques ?

Demand Supply and Elasticity: Responsiveness:

Demand Supply and Elasticity: Responsiveness Demand and Supply analysis allows us to see the direction of changes in the equilibrium price and quantity We need another concept to see how responsive demand and supply are to change in their determinants The concept that helps us measure that sensitivity is elasticity

TYPES OF ECONOMIC ANALYSIS :

TYPES OF ECONOMIC ANALYSIS Economic impact analysis (EIA) -- What is the contribution of tourism activity to the economy of the region ? Benefit Cost analysis (B/C) – Which policy will generate the highest net benefit to society over time? Environmental Impact assessment – What are the impacts of an action on the surrounding environment? Fiscal impact analysis – Will government revenues from tourism activity (taxes, direct fees, etc.) cover the added costs for infrastructure and government services Demand analysis – How will the number or types of tourists change due to changes in prices, promotion, competition, quality,etc.? Feasibility study – Can/should this project or policy be undertaken? Financial analysis – Can we make a profit from this activity?

Benefit-Cost Analysis:

Benefit-Cost Analysis Measures economic efficiency as ratio of benefits to costs Used in evaluating alternative actions Measure stream of benefits and costs over time resulting from a project Value these B/C in Rs. Discounting, NPV to handle time Non-market benefits measured

Cost Effectiveness Analysis:

Cost Effectiveness Analysis Used in lieu of B/C when valuation of benefits is difficult; also measures efficiency Best for comparing alternative means of delivering similar benefits Evaluate in terms of Cost per unit of output

Fiscal impact analysis:

Fiscal impact analysis Assess impacts of a project on government revenues and costs Identify added service requirements Estimate costs and revenues received from fees or taxes

Economic Impact Analysis:

Economic Impact Analysis Assesses impacts on sales, income, jobs, in a region Action Activity Spending Jobs Impact = Visits * Spending * Multiplier With vs Without Analysis General Formula for GDP contribution GDP contribution= Domestic Component x Money multiplier x velocity of money Y= Ed x m x V

Questions an EIA Answers (Public Park):

Questions an EIA Answers (Public Park) How much do visitors spend in the area? What portion of sales by local businesses is due to tourism? How much income does tourism generate for households and businesses in the area? How many jobs in the area does tourism support? How much tax revenue is generated from tourism? How are businesses in an area linked

What are economic impacts of Recreation & Tourism?:

What are economic impacts of Recreation & Tourism? Covered in EIA Sales Income Jobs Tax Revenues Direct & Secondary Effects Usually Not Covered Price Changes Changes in QLTY or QNTY of goods & services available in an area Seasonality Fiscal costs Non-market B/C e.g. Congestion

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