Resource information
Could the simplifying assumptions made
in project appraisal be so far from the truth that the
expected benefits of public investments are not realized?
Using data for Vietnam, commonly used estimates of the
benefits from irrigation investments based on means are
compared with impacts assessed through an econometric
modeling of marginal returns that allows for household and
area heterogeneity using integrated household-level survey
data. The simpler method performs well in estimating average
benefits nationally but can be misleading for some regions,
and, by ignoring heterogeneity, it overestimates gains to
the poor and underestimates gains to the rich. At moderate
to high cost levels, ignoring heterogeneity in impacts
results in enough mistakes to eliminate the net benefits
from public investment. When irrigating as little as 3
percent of Vietnam's non-irrigated land, the savings
from the more data-intensive method are sufficient to cover
the full cost of the extra data required, ignoring other
benefits from that data.
