Abstract This article quantifies the economic benefits of an influential early childhood program in a developing country, tracking participants with outcomes measured through age 31 years. Drawing on published experimental data encompassing life-cycle benefits – that rely primarily on available labor-market outcomes – alongside a rigorous cost analysis, we estimate an internal rate of return (IRR) of 10.4–10.7% and benefit–cost ratio of ~8. Even though estimates are not that precise, a variety of sensitivity analyses confirm the robustness of these findings. Notably, we find meaningful gender heterogeneity in returns: females exhibit a higher IRR of 11.5%, compared to their male counterparts (9.6%), suggesting that – in developing countries – early childhood programs may generate disproportionately larger economic gains for women.
Abstract Declining costs of photovoltaic (PV) technology and rising market and policy incentives are leading to the growing deployment of PV on cropland in the US Midwest, leading to concerns about the displacement of food and feed crop production. Agrivoltaic (AV) technology enables the dual use of land by co-locating PV energy and crop production, potentially reducing land-use competition with crop production. We develop a benefit-cost analysis framework to compare the net economic returns from AV to those with stand-alone PV and crop production on a representative field and show conditions under which AV can be more profitable for both a solar developer and a farmer. We integrate it with a crop and solar energy model to simulate the performance of various field designs and space and height configurations in AV systems to accommodate soybean production with conventional farm equipment under representative conditions in the US Midwest. We find that an AV system with soybean production is less profitable than PV alone for a solar developer due to the high capital costs of raising panel height, and less profitable for a farmer than leasing land for PV due to its adverse effects of shading on crop yield. We discuss the changes in technology and market prices of solar energy and soybeans that are necessary to make the AV system profitable for solar developers and farmers. We show that AV can worsen rather than mitigate the conflict between food crops and solar energy production in the Midwest.
Although wage rates are lower when employers have monopsony power, we find that the value of a statistical life (VSL) is not reduced when labor markets are more concentrated. Because the estimated VSL is the product of the wage and the wage-risk tradeoff rate, a greater tradeoff rate in highly concentrated U.S. labor markets produces a larger VSL. The general relationship we find is robust with respect to different labor market data. Our results provide the first evidence contradicting policy-related concerns that the VSL is lower in monopsonistic labor markets. The average VSL is often about $13 million (USD 2022) both for the full sample and at the median market concentration level, and it does not decline at higher levels of HHI.
A longstanding puzzle for regulatory theory and practice has been the valuation of children's lives, or more precisely, the valuation of mortality risks faced by children. There are data about parents' willingness to pay (WTP) to reduce such risks, and that data might be used to estimate the value per statistical life (VSL) for children. The problem is that any such VSL comes from the parents' valuations; it might not adequately capture the welfare effects of risk reduction for children themselves. It can be shown, however, that use of parental WTP, and the resulting VSL, is justified on four assumptions: (1) parents have adequate information, (2) parents do not suffer from a relevant behavioral bias, (3) parents have a limited budget for expenditures on their children, and regulation would amount to a forced exchange, producing a dollar-for-dollar reduction from that budget, and (4) parents are sufficiently motivated to care about their children's welfare, so that parental judgments about how to allocate limited resources for their children promote their children's welfare. If we relax one or more of these assumptions, the appropriate VSL for children might be different from, and potentially higher than, the VSL that emerges from use of parental WTP. Implementing the proposed framework presents serious but tractable empirical challenges.
This article is based on comments that I submitted to the Office of Management and Budget (OMB) as one of eight peer reviewers of OMB's 2023 draft revisions to Circular A-4, "Regulatory Analysis." Since that time, OMB issued a final version of Circular A-4, which was then rescinded in January 2025. This article summarizes some of my main comments on the 2023 draft version that I submitted as a peer reviewer, along with a "prologue" that summarizes some of the main issues raised in my peer review and an "epilogue" recognizing both the initial revision of Circular A-4 that was initially adopted, as well as the 2025 decision to rescind the revised version and return to the 2003 version of the circular. The 2003 Circular continues to provide useful guidance, but could have been improved by expanding the scope of regulatory impact analysis in ways discussed in my peer review comments.
Abstract Environmental pollution often affects the most disadvantaged people the most. In this paper, we argue that benefit–cost analyses of policies and programs designed to alleviate such inequalities should incorporate distributional considerations while respecting individual preferences. The concept of equivalent income offers a theoretically sound approach for defining distributional weights that does not rely on the comparison of well-being measures such as subjective utility, happiness or life satisfaction. We demonstrate how this concept can be used to analyze the implications of exposure to neurotoxic substances, which requires us to explicitly consider the endogenous relationship between neurodevelopment and income in the derivation of welfare weights. Through a simulation exercise, we show the difference between standard and inequity-aware welfare analysis and highlight the profound effect on program choice that accounting for unequal exposure to pollution has. Based on our results, we discuss why policymakers concerned with environmental health and safety should seek to factor fairness considerations into their decision-making processes.
This article includes my 4 June 2023, comments on the specification of the baseline in Regulatory Impact Analyses that were submitted in response to the Office of Management and Budget's (OMB's) request for comments on its draft revisions to Circular A4, "Regulatory Analysis." This article also includes supplemental remarks on the Office of Information and Regulatory Affairs' (OIRA's) Revisions to Circular A4 in Response to Public Comments. In my supplemental remarks, I clarify two regulatory situations that I believe OIRA is trying to address in its baseline guidance. I then make three points. First, I argue that the term "dynamic baseline" is preferred to "analytic baseline" because it better conveys the key point that the baseline is a forecast of future conditions. Second, I believe OIRA's final baseline guidance still leaves agencies with too much discretion to make their own assumptions about such basic parameters in the construction of a dynamic baseline as population and economic growth, technological innovation, and climate change. Third, I argue that the use of multiple dynamic baselines should be standard practice because it makes the baseline assumptions more transparent and thus to some extent mitigates the risk of bias that can arise from an analyst's strategic selection of a single baseline.
This article presents the first analysis in the literature that measures the economic benefit of drop-off recycling in terms of consumer surplus (CS). CS, a measure of the economic benefit that consumers receive from participating in economic activities, is estimated using a single-site travel cost method application based on survey data. Our findings indicate that the total CS residents of Monongalia County receive from drop-off recycling is $1,317,960 annually.
This article provides a brief Introduction to this special Journal of Benefit–Cost Analysis issue dedicated to comments filed by former presidents of the Society for Benefit Cost Analysis and editors of this journal on the Office of Management and Budget’s draft Circular A–4 on regulatory impact analysis guidelines.
In April 2023, the Office of Management and Budget (OMB) published a draft of revisions to Circular A-4, the first changes proposed since its publication in 2003. Following a public comment period, OMB published the final revised Circular A-4 in November 2023. In this article, we provide a section-by-section comparison describing the similarities and differences between the April draft and the November revision of Circular A-4. Among other observations, we note that the revised Circular A-4 changes the default social rate of time preference from 1.7 to 2.0%, retains recommendations for using distributional weighting in benefit–cost analysis, and retains recommendations to use a global point of view when determining the spatial scope of the analysis.
Ex ante, my primary concerns were about implementation across the wide expanse of federal applications, supporting the supplemental use of distributional weighting, trying to find a supportable middle ground on discounting using the expected value of bounds and a more consistent scope of analysis. Ex post, I felt heard if not followed, perhaps not uncommon for reviewers.
This paper is based on public comments I submitted in 2023 to the Office of Management and Budget (OMB) on the draft revisions to its Circular A-4 guidance on “Regulatory Analysis.” It includes my comments as submitted and a “prologue” and “epilogue” written after OMB published the 2023 version of Circular A-4. The major issues discussed in my and the other public comments on the 2023 revisions have been long been, and will remain, central to the practice of regulatory BCA. My public comments compare the 2023 revisions to the principles and practice of standard efficiency-based benefit–cost analysis (BCA). Standard BCA is a tool to evaluate whether regulations fix market failures and improve economic efficiency. The 2023 revisions to Circular A-4 depart from standard BCA in important ways.
This article presents my 2023 peer review panel comments on the 2023 Office of Management and Budget (OMB) Circular A-4 and offers recommendations for future revisions of this circular. The Prologue section introduces my official peer review comments and indicates how the structure of my comments was tailored to the guidelines established by the OMB. The main section consists of my 2023 peer review comments as they were submitted to OMB. I recommended changes in the draft Circular A-4 to increase the discount rate from the 1.7% rate that OMB proposed, to report domestic benefits whenever global benefits are reported, to adopt a behavioral transfer test for the use of behavioral economics findings, to update the procedures for estimating the value of a statistical life, and to abandon the proposed distributional weights. The most problematic component of the new Circular A-4 is the OMB distributional weights, which will shift the role of benefit–cost analyses away from the current role of providing an efficiency-oriented test. The Epilogue to my comments summarizes how the final version of Circular A-4 differs from the draft version and how future administrations might revise Circular A-4 after President Trump rescinded it.
This article is based on feedback I submitted in response to the Office of Management and Budget’s (OMB’s) April 2023 request for comments on its draft revisions to Circular A-4, “Regulatory Analysis.” Much has changed since I submitted my comments in June 2023. OMB issued a final circular in November 2023 and subsequently rescinded it in February 2025. This article includes my comments as submitted, along with an introductory “prologue” and an “epilogue” that reflects on the decision to abandon the 2023 revisions and return to the 2003 Circular. My comment addressed key elements of regulatory analysis, suggested areas where OMB could provide more guidance, and identified several aspects of the 2023 Circular that appeared to be internally inconsistent or contradictory. It concluded that some of the 2023 revisions were worthwhile, while others would have obfuscated for policymakers important information on the welfare effects of regulatory actions.
After Circular A-4 “Regulatory Analysis” had served various Presidential administrations for 20 years, in 2023 revisions were proposed and made to update and modernize regulatory guidance. At the behest of the Office of Information and Regulatory Affairs within the Office of Management and Budget, peer reviewers were nominated, and a peer review of proposed revisions was organized. Joseph Aldy, Cary Coglianese, Joseph Cordes, R. Scott Farrow, Kenneth Gillingham, William Pizer, Christina Romer, W. Kip Viscusi, and I were selected. The consequent peer reviews are the focus of this synopsis. After reading the comments from my fellow peer reviewers, I was impressed with the careful, thoughtful advice given. When asking nine peer reviewers with various backgrounds to comment on proposed revisions to guidance on regulation, we might expect to get at least 10 different views. Yet, I sense basic agreement on several key aspects of the topics of the notable proposed updates. The degree of consensus is reassuring. Less reassuring, and counter to the actual revisions adopted, is that the peer reviewers mostly agree that fundamental aspects of the updates on the discount rate, distributional analysis, and scope are ill-advised.
The Federal Communications Commission (FCC) established a separate Office of Economics and Analytics (OEA) in December 2018 to promote more consistent quality and use of economic analysis in its decisions. The agency’s reorganization concentrated economists who previously were dispersed across different offices and bureaus. This paper describes key organizational choices that were made in the period preceding and soon after the establishment of OEA. We show how these decisions – which relate to decision rights, formal control systems, and informal practices and procedures – are consistent with organizational theory and practice. We also draw lessons from the FCC’s experience that may apply to those tasked with managing economists and other specialized or technical staff in large and/or complex organizations.
Benefit–cost analysis is a protocol for assessing alternative public policies, primarily in terms of efficiency. An important complementary element can be estimating distributional impacts to show net benefits for groups of interest. The fundamental advantage is enabling decision-makers to see and weigh the importance of changes in efficiency and changes in distribution. Rigorous estimates of any distributional effects should incorporate credible baselines, private behavior, and markets. Estimation for groups with limited evidence and data is hard. Primary estimates of net benefits should be based on conventional market values. Any estimates based on distributional weights should be supplementary estimates. Combining them into a single number, risks masking the impacts of efficiency and distribution. The values of regulatory effects to U.S. citizens and residents depend on where the risks of damage take place. Willingness to pay values by U.S. citizens and residents to adopt a global value of benefits to increase the probability of international agreements can be positive but will reflect uncertain negotiation and compliance. The primary analysis should focus on benefits and costs to U.S. citizens and residents within domestic borders. The recommended rate of 1.7% does not reflect the rates relevant for all members of society. Given the emphasis on distribution effects, rates should include those facing rates of 3% or more. Sensitivity analysis should include several rates. The onus should be on making the case for a specific behavioral bias and nudge that will successfully address the perceived problem. Recent meta-analyses of nudge interventions indicate difficulty in implementing effective nudges.
Under President Clinton’s Executive Order 12866, “Regulatory Planning and Review,” U.S. federal agencies have been required to assess the costs, benefits, and other impacts of their major regulations since 1993. The U.S. Office of Management and Budget (OMB), in the Executive Office of the President, is responsible for overseeing this process and issuing related guidance. Under the Biden Administration, in April 2023 OMB issued a draft update of its 2003 Circular A-4 best-practice guidance and requested public comment. That update was finalized in November 2023, then rescinded by the Trump Administration in January 2025. This special issue of the Journal of Benefit-Cost Analysis provides reflections on the revisions of that guidance from past Society for Benefit-Cost Analysis presidents and Journal editors. Although I address several substantive issues in my comments and other work, barriers to implementation of best practices remain a major concern. Most of those who commented on the proposed revisions focused largely on the words on the page rather than on the work needed to implement them. Yet one of the most important sentences in both original and revised Circulars reads: “You will find that you cannot conduct a good regulatory analysis according to a formula. Conducting high-quality analysis requires competent professional judgment…” The challenge is supporting the development of this judgment, and ensuring that analysts have the data and resources necessary to conduct high-quality analyses that are useful for decision-making.
We develop a model to perform a cost-benefit analysis of bus fare subsidies under financial constraints that preclude the purchase of additional buses. Our model considers users' costs in the provision of bus services and the lack of road pricing to internalize urban transport externalities in a context where financial constraints severely limit the institutional ability to plan and design the bus system. Because of financial constraints, the bus system can hardly accommodate demand during peak times: buses travel overcrowded, passengers cannot board the first bus to arrive at the bus stop, and they cannot arrive at their destination at their desired time. Another salient aspect of our model is the inclusion of motorcycles as a second private transport mode. Motorcycles are typical in many urban agglomerations in the emerging world and engender many negative transport externalities. According to our results, fare subsidies provide social benefits in Metropolitan Asunci & oacute;n. During peak hours, a higher subsidy is justified as the reduction of the unpriced external costs of substitute modes compensates for the increased cost created by an additional bus passenger. In the off-peak, a higher subsidy is justified (i) as the higher frequencies induced by the new bus ridership reduce waiting times and (ii) because of the reduction of the unpriced external costs of substitute modes. Although our model does not explicitly include inequality aversion, we discuss the distributional aspects of subsidies in the context of middle-income countries.
