Cost-Effectiveness Analysis (CEA) of Public Investment Projects

Krzysztof Jarosinski
European Research Studies Journal, Volume XXIV, Issue 3B, 769-786, 2021
DOI: 10.35808/ersj/2500


Purpose: The aim of the article is to investigate the conditions and possibilities of wider use of methods of cost-effectiveness analysis of investment projects in the public sector, and to assess the role in decision-making in the conditions of crisis phenomena, in particular the risk of excessive budget deficit and public debt. Design/Methodology/Approach: The concept of the article refers to the changes in the global economy and in the public finance sector in the face of the crisis. As part of the research, negative economic and social changes were observed. In 2020, many countries saw a significant decline in the value of GDP, with a simultaneous increase in the budget deficit and public debt. This resulted in changes in the financing of public tasks. Research proves that there is a need to improve the efficiency of public spending and a wider use cost-effectiveness analysis. Findings: During the research, it was noticed that in the changing economic conditions it is justified to pay attention to increasing the efficiency of public investment projects and to a wider use of cost-effective methods of project analysis. The importance of this group of methods is related to the possibility of analyzing and evaluating projects for which it is not possible to measure the achieved effects in monetary terms. It was noticed that public investment projects, especially small ones, were not always analyzed and assessed. A broader and precise application of cost effectiveness analysis (CEA) can lead to the improvement of economic efficiency in the wider social dimension. The effects of crisis phenomena may be long-term, as indicated by the results of prospective studies. Practical implications: The use of CEA can disseminate research methods and improve efficiency where other research is often impossible. Originality/Value: The article is an attempt to draw attention to the need to improve the effectiveness of public funds in the conditions of crisis phenomena. The practice has not always been related to examining the effectiveness of public spending, especially those of less value.

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