Conference on Benefit-Cost Analysis : Distributional Issues and International Experience

Motivation

Distributional issues are important in the pursuit of a just transition, as highlighted by the IPCC, as well as the Haut Conseil pour le Climat in France. As a matter of fact, many public projects, including public investments, are motivated by a concern for disadvantaged territories or segments of the population. Inequalities in infrastructures between districts and between cities, in connectivity to relevant economic and cultural hubs, in access to public goods and facilities, in vulnerabilities to externalities, and in environmental quality very often undergird public programs related to education, health, security or environmental preservation. Imperatives of social acceptability further justify paying attention to these aspects, and repeated protests in France about environmental regulation (“bonnets rouges”, “gilets jaunes”, farmers) have made it plain to policy-makers.

Nevertheless, in France, benefit-cost analysis, while systematically applied to public investments, usually leaves distributive impacts of the projects out of the quantitative assessment and has difficulty taking into account the desire to reduce territorial inequalities to ensure equal access to public services, for example. 

In many other countries, in contrast, guidelines for the incorporation of distributive impacts into the computation of the net value have existed for some time. In the UK, for instance, the Green Book recommends the transparent use of weights in the aggregation of monetized impacts where distributional effects are significant and well understood. In the European Union, non-binding guidelines propose to use weights that are inversely proportional to a power function of the living standards of the relevant social groups. A particularly important 2023 revision to the guidelines published by the White House in the USA (Circular A4) has introduced the possibility for agencies to also rely on weights, and there is even a specific recommendation for the value of the coefficient that should be used in such weights, based on estimates of diminishing marginal utility.

This conference initiates an effort to improve the integration of distributive effects into benefit-cost analysis in French agencies. This conference will be followed by a revision of the guidelines based on the best practices and sound theoretical and methodological bases. Its conclusions will be a key input in the process leading to the new guidelines.

The incorporation of distributive issues is generally considered difficult not only because of the need to justify the value judgments underlying weights, and the complication implied by weighting not only the benefits but also the costs of the projects, but also because the estimation of impacts for different social groups (by area, age, socio-economic status, income) may be difficult and involve assumptions about behaviors, about adjustments of taxes and transfers to the impacts on households, and about general equilibrium effects through variations in prices and wages at the local level. The conference will cover both aspects of this topic in order to achieve recommendations on the integration of the distributive dimension in the socioeconomic evaluation methodology in France and to identify research-deepening tracks.

This international conference, organized by French Scientific council on socioeconomic evaluation methods placed with France Stratégie, will aim at sharing experiences and questions with French experts and also from a few countries in which the practice of distributional analysis has accumulated relevant knowledge in this domain. The audience will gather experts on the topic as well as practitioners from many parts of the French administration. It will feature:

• a keynote laying out the relevance of distributional effects and the main theoretical and practical considerations relative to their integration into benefit-cost analysis
• a round-table on the determination of the relevant social groups, and the estimation of distributive impacts
• a round-table on international experiences in aggregating benefits and costs with weights

Agenda

9:15 Introduction

Marc Fleurbaey, Paris School of Economics, President of the Scientific Council for Cost-Benefit Analysis at France Stratégie   

9:30 Keynote: Equity in benefit-cost analysis, from principles to practice

• Marc Fleurbaey, Paris School of Economics, Président of the Scientific Council for Cost-Benefit Analysis at France Stratégie   
• Luc Baumstark, Université Lumière Lyon-II, Vice-president of the Scientific Council for Cost-Benefit Analysis at France Stratégie

10:00 Round table: Identifying relevant social groups and estimating distributive impacts

• Antoine Bozio, Paris School of Economics
• Stefano Carattini, Georgia State University
• Gabrielle Fack, University Paris Dauphine
• Moderated by Katheline Schubert, University of Paris 1 Panthéon Sorbonne, Paris School of Economics

11:15 Round table: Distributive impacts in the computation of a net present value: International experience

• Ben Groom, University of Exeter
• Massimo Florio, Università degli Studi di Milano
• Danaé Arroyos-Calvera, University of Birmingham
• Doramas Jorge Calderon, European Investment Bank
• Moderated by Aude Pommeret, University of Savoie Mont Blanc

12:30 Closing remarks : Marc-Antoine Lacroix, Director of Public Investment Evaluation, SGPI

The conference will be held in both French and English and will be simultaneously translated.

With the support of

An afternoon seminar will be organized. Restricted to a small group of experts, the seminar will involve:

• short presentations by participants of their current work and projects
• exchange on open questions, difficulties, and controversies that deserve further research investments
• planning a special issue of an academic journal that would be published on the basis of a call for contributions published after the seminar

You find the the “Call for contributions” here. Submissions in the form of an extended abstract should be sent to jincheng.ni@strategie.gouv.fr.