| Author Name | KONO Tatsuhito (Tohoku University) /KITAMURA Naoki (Tohoku University) /YAMASAKI Kiyoshi (Value Management Institute, Inc.) /IWAKAMI Kazuki (Value Management Institute, Inc.) |
|---|---|
| Creation Date/NO. | September 2013 13-E-072 |
| Research Project | Development Policies for Robust Regional Economies, Learned from the Great East Japan Earthquake of 2011 |
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Abstract
Cost-benefit analysis (CBA) is considered as an effective means to avoid the government's failures of public projects. However, once CBA becomes mandatory and residents expect a public project to be established based upon it, there is the potential for a dynamic inconsistency problem to arise. Taking as an example the coastal levee improvement policy in the city of Rikuzentakata in Japan, the present study clarifies the mechanism behind the dynamic inconsistency problem that is attributable to mandatory CBA and also discusses quantitatively the influence of the dynamic inconsistency problem on social welfare. In addition, through examining the quantitative result, we indicate that, in the projects where the improvement cost increases gradually with the scale, the inefficiency of the dynamic inconsistency problem is incurred on a larger scale.
This is the English version of the Japanese Discussion Paper (13-J-045) with some additional information and changes
