Routine "quick-and-dirty" methods of project appraisal can be so dirty in guiding project selection as to wipe out the net social gains from public investment.
Routine "quick-and-dirty" methods of project appraisal can be so dirty in guiding project selection as to wipe out the net social gains from public investment, contend van de Walle and Gunewardena, illustrating their point with a case study of irrigation projects in Vietnam.
They test a common quick-and-dirty method for estimating benefits from irrigation investments, using data for Vietnam. They compare the results with impacts assessed through econometric modeling of marginal returns, which allows for household and area heterogeneity using integrated household-level survey data.
The quick-and-dirty method performs well in estimating average benefits nationally but can be misleading for some regions and, by ignoring heterogeneity, overestimates how much the poor gain.
At moderate to high project cost levels, quick-and-dirty makes enough mistakes to eliminate the net benefits from public investment. When irrigating as little as 3 percent of Vietnam's nonirrigated land, the savings from the more data-intensive method are enough to cover the costs of the extra data required.
This paper—a product of the Development Research Group—is part of a larger effort in the group to assess the welfare impacts of public spending. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Cynthia Bernardo, room MC2-501, telephone 202-473-1148, fax 202-522-1154, Internet address cbernardo@worldbank.org. (38 pages)
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