Jonas Eliasson, Mattias Lundberg

1. Do cost-benefit analyses affect transport investment decisions?Experience from the Swedish Transport Investment Plan 2010-2021 Jonas Eliasson, Mattias Lundberg

2. Questions To what extent do CBA results affect the choices of which transport investments to build? How do planners use CBA results in their professional practice? What are the planners (and the politicians) revealed preferences and implicit valuations?

3. The Swedish context Infrastructure provision a responsibility for the public sector – government funding for national and regional investments Ministries small in Sweden – Agencies under the Government play an active role 10-12 year Transport Investment Plans, made by public sector agencies Government (and Parliament) have final decision on the plans

4. Role of CBAs in the planning process 2010-2021 • Increased Government emphasis on CBA • Large efforts to carry out CBAs, make them comparable and improve the methods • Appraisal Summaries for each proposal • Quantitative CBA result • Non-monetized effects • Distributional effects

5. Previous research • McFadden (1975) • Nilsson (1991) • Odeck (1996, 2010) • Fridström and Elvik (1997) • Nellthorp and Mackie (2000) • Most found virtually no correlation between benefit-cost ratios and investment decisions • Exceptions: Odeck (2010), Nellthorp and Mackie - BCR does not matter, but some of its components

6. Three parts of the plan Initial plan mostly ”old” investments from previous plans (ongoing or late planning stage) Base plan and Extended plan decided by planners

7. Distribution of net benefit/investment cost ratio (NBIR)

8. NBIR effect on probability to get into the plan Probability of inclusion in Plan Net benefit/ investment cost

9. Binary logit for probability of inclusion in plan • Initial and extended plans: • Benefit/cost ratio strong influence for low values • … but once the ratio is over a ”threshold”, other considerations seem to decide • Base plan • Clear influence of NBIR, but decreasing with NBIR

10. Planners’ use of CBA • Rail adm not used to searching cost-effective solutions • Emphasis on CBA affected design of investments • Avoided investments with NBIR<0 • Road adm rather strong CBA tradition • Tried to design investments cost-effectively • Avoided investments with NBIR <0 • Ranked most remaining investments wrt. NBIR • Other considerations: • priorities of regional politicians and planners • “some” geographical fairness • “system perspective” (e.g. prioritising dedicated “rail freight routes”) • share btw rail and road “decided” beforehand

11. Planners revealed preferences (1): Cities/rural areas, mode, size • Investments in major urban regions higher probability to get in plan • No ”modal bias” detected for planners in Base plan – but politicians are biased towards rail

12. Planners’ revealed preferences (2):Relative valuations of benefit types • Freight benefits are valued twice as much as person benefits • … while traffic safety benefits are hardly valued at all

13. Conclusions Do CBA results affect the choices of which transport investments to build?Yes, benefits for society 72 bn SEK instead of 50. Could have been 87. Do planners use CBA results in their professional practice?Yes, screening tool and made solutions more cost-effective Do their revealed preferences show any bias?Yes, bias for major urban areas and partly for rail. No size bias. Do implicit valuations differ from the official ones?Yes, higher for freight and lower for traffic safety Is CBA now sufficiently well developed to be used?Yes, for most applications