ABSTRACT
In the case of an individual project (e.g. a particular stretch of road), a conventional cost-benefit analysis could be carried out, with competing projects ranked in terms of increasing internal rate of return. Such analysis, however, gives rise to obvious difficulties in relation to the need to evaluate the impact of spillover effects and externalities in the context of the complete CSF. Moving up the scale of aggregation, the totality of projects targeted at a general or systemic problem (say, long-term unemployment or industrial competitiveness) could be evaluated in terms of how successful they are in attaining their overall priority objective. Finally, the effectiveness of the entire CSF can be evaluated as an integrated whole. Given the size of the funding in relation to the size of the economy, and the obvious implications for domestic fiscal policy, it was necessary to examine the impact of the CSF in a context that included economy-wide feedbacks and interactions, attempting to account for spillover effects and externalities. Here one needs to make use of formal national or regional economy models: input-output (I-O), macroeconometric, computable general equilibrium (CGE), growth, etc. Our chapter deals entirely with this higher level of analysis.
