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The limits of the economic value in measuring the performance of social entreprises

The limits of the economic value in measuring the performance of social entreprises. Liège, 3-4 March 2011. Michel Marée & Sybille Mertens HEC-ULg, Centre d’Economie Sociale. Question : How can we compare performance of various types of providers ? Paper :

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The limits of the economic value in measuring the performance of social entreprises

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  1. The limits of the economic value in measuring the performance of social entreprises Liège, 3-4 March 2011 Michel Marée & Sybille Mertens HEC-ULg, Centre d’Economie Sociale

  2. Question : How can we compareperformance of various types of providers ? • Paper : • Synthetic analysis of the various methods used to measure global performance, including non-market dimensions of performance • Focus : limits of the economic value Introduction

  3. Dimensions of performance of a work integration social enterprise active in the area of waste collection and recycling One example

  4. Dimensions of performance

  5. The measures of nonmarket production

  6. Cost-based approach (underestimation) • Revenue-based approach (underestimation) Accounting measure

  7. The measures of nonmarket production

  8. Physical indicators (+ qualitative analysis) • Limits : • Partial character of the indicators • Weigthing problems • Specific character of the indicators • Requirement for interdisciplinary work • Existence of intangible impacts Cost-effectiveness analysis

  9. The measures of nonmarket production

  10. Comparing the costs and the benefits • NAV =  (Bi–Ci)/(1+r)i with i = 0,…,n • Two techniques : • Indirect monetary value • Economic value (Willingness to pay- WTP) • Revealed preferences • Expressed preferences (Contingent valuation Method-CVM) Cost-benefit analysis

  11. Advantages : • Rigorous, WTP explained by the consumer theory • Objective (based on individual’spreferences) • Global (covering all dimensions) • Consistentwith the evaluation of marketgoods • Limits : • Technical • Methodological : embedding effect, scope effect , sequence effect and warm-glow effect • Conceptual Cost-benefit analysis

  12. EV = SVi for i = 1,…,N, where N is the number of persons concerned and Conceptual limits SVi = V(Ui)= WTPi, • Hypothesis : • Max of the utility function • Monetary measures of the variation in utility • Assimilation of utility to value (welfare approach) • Economic value = sum of individual subjective values

  13. Conceptual limits

  14. CBA with CVM : • Tooambitious • Limits of economics • CEA • Social construction • Interdisciplinary work • Evolutive work Conclusion

  15. Centre d’Economie Sociale – HEC-ULg www.ces.ulg.ac.be + 32 4 366 27 51 Contacts

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