Lars Hultkrantz, Aug 2017

Evaluation of impact and efficiency in economics and finance

The aim of this course is that the participants should acquire knowledge and expertise to be
able that:
(1) Understand the content and differences between different types of economic evaluation
methods such as cost-benefit analysis, cost-effectiveness analysis and cost-utility analysis.
(2) Use microeconomic and welfare economic theory to understand, analyze and critique
different types of economic evaluations.
(3) To have such expertise that they themselves can plan and conduct an economic
evaluation.

The course is examined with both a written exam (6 credits) and a course paper (1.5 credits).
This exam is divided into three sections (1), (2) and (3), following these three parts of the
aim, and to get a Pass (E-C) in the written exam you need to have (at least) an E on all
sections. To get a High Pass (B-A), you need have at least A or B in two sections in the
written exam. Since the reading list is completely new and the exam will be different, you
have no use of previous exams.

The course paper is mandatory. You can write together with (at most) one other student.
You will get no detailed instructions on the format, but since you are a student in a master
class, you are expected to know how to structure and write a short academic paper, so
please pay attention to the format. The course paper is graded Not Pass, Pass or High Pass.
For a Pass on the whole course you need (at least) Pass on both the written exam and the
course paper. For a High Pass you need High Pass on the written exam and (at least) Pass on
the course paper.

The content of the course is the recommended reading, the lectures, and a course paper.
The course paper especially trains aims (2) and (3). For the reading, follow the list below. The
syllabus allows addition of a few more papers to those listed in it. I have used that option,
both to include some very recent stuff and to replace some items in the syllabus with things

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that make an easier read (the remaining literature in the syllabus can be used for reference if
you want to dig deeper into something).

As you see, you can get everything through the web (or here on BB). Not having a main
textbook makes the course a little more demanding for you, but the textbooks that are
available on the market are not very up to date with the state of art of actual practices nor
of research.

1. Background, motivation
Lecture: 3 October, 9-12

 Investors increasingly evaluate three dimensions of investments prospects: Financial

returns, risk & social impact
Read:
a. Antony Bugg-Levine and Jed Emerson, Impact Investing. Transforming How We
Make Money while Making a Difference
http://www.mitpressjournals.org/doi/pdf/10.1162/INOV_a_00077
b. Maximilian Martin, Status of the Social Impact Investing Market: A Primer
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/21
2511/Status_of_the_Social_Impact_Investing_Market_-_A_Primer.pdf
 Successful public sector innovation requires good investment management practices
Read:
European commission, A guide to social innovation, pp. 6 - 20
http://s3platform.jrc.ec.europa.eu/documents/20182/84453/Guide_to_Social_Innov
ation.pdf
 Political regulation should be effective and efficient: Regulatory Impact Assessment
Read:
Lena Nerhagen, Sara Forsstedt, Regulating transport. The possible role of regulatory
impact assessment in Swedish transport planning
https://www.itf-oecd.org/sites/default/files/docs/regulatory-impact-assessment-
swedish-transport-planning.pdf
(Further reference: European Commission (2015), Better Regulation Guidelines,SWD
(2015) 111 final)
http://ec.europa.eu/smart-regulation/guidelines/docs/swd_br_guidelines_en.pdf
 Development assistance needs to be based on effective management of social
investments
Read:
Jack, W. (2001), Social Investment Funds: An Organizational Approach to Improved
Development Assistance, The World Bank Observer 16 (Spring):109-124

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 http://documents.worldbank.org/curated/en/340221468337871412/pdf/766550JRN
0WBRO00Box374385B00PUBLIC0.pdf

2. Evaluation of programme effectiveness: How do we know what works – and how much?
Lecture: 5 and 10 October
Read:
a. Treasury Board of Canada, Program Evaluation Methods (on causal
inference)
https://www.tbs-sct.gc.ca/cee/pubs/meth/pem-mep-eng.pdf
b. Washington State Institute for Public Policy (2017) Benefit-Cost model,
Benefit-Cost Technical Documentation, Ch. 1-3 (on estimating effect size)
(www.wsipp.org)
c. J D Angrist and J-S Pischke, The Credibility Revolution in Empirical Economics:
How better Research Design Is Taking the Con out of Econometrics, Journal of
Economic Perspectives 24(2), 3-30, 2010.
http://www.nber.org/papers/w15794.pdf

3. Efficiency: Overview of Cost-Benefit Analysis; Distribution and equity

Lectures: 10 and 16 October
Read:
a. Mikael Svensson, Cost-Benefit Analysis (pdf on BB)
b. Ch. 1 and 2 in Hagen, K P, S Berntsen, B Bye, L Hultkrantz, K Nyborg, K R
Pedersen, M Sandsmark, G H Volden och G Åvitsland (2012),Cost Benefit
Analysis, Norges offentlige utredningar 2012:16

https://www.regjeringen.no/contentassets/5fce956d51364811b8547eebdbcde
52c/en-gb/pdfs/nou201220120016000en_pdfs.pdf

4. Methods for economic valuation of benefits

Lectures: 18 and 19 October
Read:
Accent and Rand Europe, Review of Stated Preference and Willingness to Pay
Methods
(Consultancy report)
http://webarchive.nationalarchives.gov.uk/+/http:/www.competition-
commission.org.uk/our_role/analysis/summary_and_report_combined.pdf

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5. Valuing life and health, Cost-Utility Analysis and QALY measurement
Lecture: 25 October
Read:
a. Ch. 10 in Hagen, K P, S Berntsen, B Bye, L Hultkrantz, K Nyborg, K R Pedersen,
M Sandsmark, G H Volden och G Åvitsland (2012),Cost Benefit Analysis, Norges
offentlige utredningar 2012:16
b. Hultkrantz, L & Svensson, M (2012), The value of a statistical life in Sweden:
A review of the empirical literature
http://ac.els-cdn.com/S016885101200259X/1-s2.0-S016885101200259X-
main.pdf?_tid=d3c11968-7db4-11e7-8680-
00000aacb35d&acdnat=1502360306_84aa3871281e2e5bdd59bf88da400766

7. Discounting, sustainability, global warming and other disasters

Lecture: 26 October
Read:
a. Chs. 4, 5, 8 and 9 in Hagen, K P, S Berntsen, B Bye, L Hultkrantz, K Nyborg, K R
Pedersen, M Sandsmark, G H Volden och G Åvitsland (2012),Cost Benefit
Analysis, Norges offentlige utredningar 2012:16
b. Hultkrantz, L & Panagiotis, M (2017) Tail-Hedge Discounting of Long-Term
Forestry Returns
(see pdf on BB)

8. Issues arising in implementation, repetition

Lecture: 1 November
Read:
a. Gustafsson-Wright, E, Gardiner, S & Putcha, V (2015),The Potential and
Limitations of Impact Bonds. Lessons from the first five years of experience
worldwide, Brookings, Global Economy and Development Program (skip
Appendix!)
https://www.brookings.edu/wp-content/uploads/2016/07/Impact-
Bondsweb.pdf
b. Henrik Andersson, Lars Hultkrantz, Gunnar Lindberg, Jan-Eric Nilsson, 2017,
CBA in Transport in Sweden,See pdf-file on BB.
c. Mikael Svensson, Lars Hultkrantz, 2017, A Comparison of Cost-Benefit and
Cost-Effectiveness Analysis in Practice: Divergent Policy Practices in Sweden.
Nordic Journal of Health Economics.
file:///C:/Users/lhz/Downloads/1592-13394-1-PB%20(1).pdf

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9. Discussion of course papers
Seminar: 2 November
Your task for the course paper is to

 Search for and select an evaluation of an intervention, program or investment

(impact evaluation or economic BCA/CEA/CUA evaluation
 Write a brief review of this evaluation study
 Describe a decision setting in which this study could be useful
o Who is the decision maker?
o What is the choice set?
 Comment on and criticize the internal and external validity of this study in the
perspective of the decision situation you have imagined
 Suggest improvements or amendments to this study that would make it more useful
as a basis for the decision to be made. If the evaluation is only an impact evaluation,
you need to describe how to design an economic evaluation in which it can be used.
The course paper is expected to be 5-7 pages. It is distributed on Blackboard and the
deadline for putting it on BB is Monday Oct 30, 24.00. Also you must send me separately the
paper by e-mail to Urkund in this way:
To: lars.hultkrantz.oru@analys.urkund.se
Subject: Lastname [CBA]
[CBA] – within brackets – is used by Urkund to group the papers

Finally, you should also make a one page power-point presentation and be prepared to make
a very brief (5 minutes) presentation at the seminar. If you are writing with someone else,
one of you will be randomly assigned to make the oral presentation.

Where can I find a study to review?

 School studies:
- John Hattie Visible learning, A meta study of 800 meta studies, see
https://s3-us-west-2.amazonaws.com/tandfbis/rt-
files/docs/FreeBooks+Opened+Up/Know_Thy_Impact_Visible_Learning_in_Theory_and_Pra
ctice.pdf

 Medicine, public health and social work

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www.sbu.se
https://www.nice.org.uk/

 Infrastructure projects
http://www.trafikverket.se/for-dig-i-branschen/Planera-och-utreda/Planer-och-
beslutsunderlag/Samhallsekonomiskt-beslutsunderlag/Infrastructure