While MCC typically presents economic analysis outputs in Microsoft Excel format, in this case MCC contracted the Transport Research Library (TRL) to conduct an economic rate of return (ERR) analysis on Vanuatu’s compact. To calculate the ERR, TRL utilized the Highway Design and Maintenance Standards Model (HDM-4), the state-of-the-art software program for technical and economic appraisal of road investment projects, standards, and strategies. The report details TRL’s methodology and findings and, even though the format is different, still captures the Vanuatu ERR analysis in a clear and accurate manner.
What the report represents
- An overall impact estimate. The report provides MCC’s best estimate of the likely economic impact of the project, both during project implementation and for a period of years beyond it.
- Estimated benefits. The report estimates the expected increases in either incomes or value added of individuals, households, firms or sectors of economic activity.
- A counterfactual scenario. Potential benefits are compared against what is likely to happen without the project (e.g., a growing economy would be expected to continue growing, even without the project).
- A snapshot in time. The report reflects the best data available to MCC at the time that the ERR was calculated.
What the report does not represent
- The sole reason for an investment decision. Although ERRs are an integral part of MCC’s decision-making process, other factors are taken into account when MCC decides whether or not to undertake a project.
- A detailed beneficiary analysis. The ERR report portrays the overall economic impact of a project rather than apportioning the income gains along various demographic dimensions.
- Up-to-the-minute information for projects in implementation. ERRs are projections of estimated net benefits over time, rather than measurements of actual net benefits as they occur. Many of the parameters that are used in these estimates change, so ERRs may not reflect the actual implementation experience. When project designs or model parameters change significantly, MCC may revise these models; updated information will be posted here as it becomes available.
Some familiarity with cost-benefit analysis will be essential to use these spreadsheets:
MCC is making this information available to the public because we believe in transparency and the importance of this type of analytical work.
We welcome questions, comments, and criticism as part of our continuing effort to improve our products, and are eager to receive suggestions as to how we can make the presentation of this information more user-friendly. Contact us at the Office of the Chief Economist.