What characterises road projects with positive net benefit-cost ratios? Insights from Norway and Sweden

Abstract

This study examines factors that characterise projects with a positive net benefit-cost ratio in the early planning stage, where precise Cost-Benefit Analysis (CBA) is not yet feasible. Our rationale for the study is twofold. First, identifying such factors can aid in selecting potentially economically viable project ideas at an early planning stage (and correspondingly, sifting out economically unviable ones), avoiding the further development of projects and thereby avoiding political lock-in to projects that will entail a negative social benefit. We use data from 413 CBAs conducted in Norway and Sweden. The regression analysis uses geographical and other project-specific characteristics as independent variables. Our data confirms the assumption that travel time savings represent the largest share of project benefits. We also demonstrate that Swedish projects have a higher value for money than their Norwegian counterparts. The following characteristics are most important in determining road projects’ net benefit-cost ratio: traffic levels, population density and local income level. We also find that smaller projects have a higher net benefit-cost ratio than larger ones, contrary to common assumptions. Furthermore, local co-financing negatively affects the ratio due to the deadweight loss induced by tolls greater than the marginal cost of public funds or because co-funding by the region influences project selection. These findings can influence future project selection and development, as they provide valuable insights for practitioners and policymakers in the field of transport and infrastructure development, aiding in identifying economically viable project ideas at an early stage.

What characterises road projects with positive net benefit-cost ratios? Insights from Norway and Sweden