COST ANALYSIS WITH IMPERFECT DATA EXAMPLES FROM INTERNATIONAL DEVELOPMENT KERI CULVER, SENIOR EVALUATION SPECIALIST MANAGEMENT SYSTEMS INTERNATIONAL/COFFEY

SESSION GOALS Outline cost analyses methods Show examples of cost data Practice cost evaluation methods given imperfect data Discuss use of findings

COST-EFFECTIVENESS ANALYSIS (CEA) “the evaluation of alternatives according to both their costs and their effects with regard to producing some outcome.” Levin, Henry M and Patrick J. McEwan “Cost-effectiveness Analysis.” Second Edition. Sage Publications. Thousand Oaks, California. P

COST-BENEFIT OR BENEFIT-COST ANALYSIS “the evaluation of alternatives according to their costs and benefits when each is measured in monetary terms.” Levin, Henry M and Patrick J. McEwan “Cost-effectiveness Analysis.” Second Edition. Sage Publications. Thousand Oaks, California. P

COST-UTILITY ANALYSIS (CUA) “the evaluation of alternatives according to a comparison of their costs and their utility or value.” Levin, Henry M and Patrick J. McEwan “Cost-effectiveness Analysis.” Second Edition. Sage Publications. Thousand Oaks, California. P

HOW TO COUNT COSTS? 1.Explicit costs and project expenditures 2.Implicit costs: volunteers and donation 3.Estimated costs

THINK LIKE AN AUDITOR Does the cost structure make sense? Scan the data for errors: Budget or expenditures? What do the categories mean? What’s missing? Does anything look wrong?

MEASURING EFFECTIVENESS Examples to brainstorm 1.Food aid project with food for work component, designed to increase rural smallholders’ agricultural sales 2.Teacher training project for pastoral society in Africa, designed to improve girls’ life skills knowledge and change behaviors 3.Micro-lending program in Latin America designed to increase women entrepreneurs’ productivity in urban areas

THE RATIO - CEA Cost: effectiveness (Remember: for cost-effectiveness we would be comparing the ratio for two different programs designed to reach the same goal.) C (Cost) E (Effectiveness) Simple formula, can be a complex calculation

SIMPLE EXAMPLE Girls’ attendance program costs: $3,728,209 20,468 secondary school girls in Ethiopia who (statistically speaking) would have dropped out for early marriage or paid work in the market have instead finished school and passed the school leaving exam. $3,728,209 20,468 = $ per girl completing school

WHAT’S SO COMPLEX ABOUT THE CALCULATION? Denominator Other types of effects – such as percentages over a population Test data and cost per point increase in score Data quality Numerator Project has multiple objectives, each with a portion of the costs Changes over time – discounting (also applies to effects) Fixed versus variable costs, stepped costs Project uncertainties Scale may affect C/E ratio – fixed and variable costs Benefits don’t accrue to all beneficiaries equally

COST-BENEFIT ANALYSIS

HANDS-ON

GAINING “BUY-IN” IN ZAMBIA Embedded in Ministry’s new Cash Transfer Unit FAQs website and “Evaluation 101” We needed their help on tight deadlines  Assembling lists of CWACs  Meeting in Lusaka for random ordering of communities  Form 1 data collection - targeting  Random selection of households

REFERENCES Corso, Phaedra S Presentation “An Introduction to Economic Evaluation,” Presented at AEA/CDC Summer Evaluation Institute. June Downloaded 28 Oct 2011 at 1.pdf?AWSAccessKeyId=1RMAN8YH8YCNBW6KAZG2&Expires= &Si gnature=mFAnJc1eDEfbIdCAL8HU07yPmSE%3D 1.pdf?AWSAccessKeyId=1RMAN8YH8YCNBW6KAZG2&Expires= &Si gnature=mFAnJc1eDEfbIdCAL8HU07yPmSE%3D Levin, Henry M and Patrick J. McEwan “Cost-effectiveness Analysis.” Second Edition. Sage Publications. Thousand Oaks, California. Thank you for your interest! Keri Culver