CBA in lesser developed countries
This chapter outlines the unified methodology, discussing issues of shadow pricing before describing a case study by way of illustrating implementation of the method. Shadow price issues include the pricing of traded and non-traded commodities in light of the presence of trade restrictions, efficiency pricing of factors of production and social pricing. The distinctive aspect of the use of cost–benefit analysis in lesser developed countries (LDCs) is that routine procedures make more extensive use of shadow prices than in developed countries. This is because distortions and disequilibria in market processes are more pervasive and serious in LDCs, the distribution of income and wealth is usually more markedly skewed, and the shortage of savings required to finance economic growth is more acute. Conversion factors for non-traded commodities and primary domestic inputs are ideally available from the Central Planning Office for translating domestic prices into border prices. An accounting ratio is the ratio of border price to domestic market price.