The Choice of Large Projects

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Abstract
Conventional cost-benefit analysis has generally not taken into account the care in which the project is sufficiently large that its introduction would have significant general equilibrium effects. This paper examines rules that indicate whether such large projects should be accepted or rejected. The rule uses the information from before-project and after project equilibrium prices and production data. Rules are developed for the un-distorted 'first best' case, the case in which the fixed cost of the project are covered by distortionary taxation, and the case of projects producing public goods.
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