Syllabus Fall 2019 PDF

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Syllabus of Economics of Cost Benefit Analysis AY19/20...

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University of Maryland Department of Economics Fall 2019

ECON 426 (0101) Economics of Cost-Benefit Analysis Class Meeting Time: MW 3:30pm - 4:45pm Class Location: Tydings 2111

Instructor: Olga Fetisova E-mail: [email protected] Office Hours: MTue 10 am - 11 am (in Tydings 3115P) or by appointment

Course Description This course provides an overview of how to use the tools of applied microeconomics to conduct policy analyses using a cost-benefit framework, including both randomized and nonrandomized evaluations and experiments. We focus on evaluation design and implementation including needs assessment, process evaluation, and cost benefit analysis. Cost-benefit analysis (CBA) is traditionally defined as the method by which an optimal choice is chosen from a set of alternatives that makes society best off. Though there are multiple criteria by which one might measure the extent to which society benefits from a project, we rely primarily upon one used by most economists—economic efficiency. In this context, the naïve decision rule one might employ—namely, choose the project whose dollar-valued benefits exceed its costs by the greatest amount—seems straightforward. Cost-benefit analysis, however, requires that an analyst address a number of complications including: 

The tradeoff between maximizing social welfare and maximizing the difference between measured benefits and costs.

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Determining which groups should be included and to what extent they be included in the cost-benefit analysis.

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Expressing impacts as best as possible in real and/or constant dollar terms.

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The timing of analysis in relation to project implementation and impacts of political pressure that may affect outcomes.

Course Objectives

The overarching goal of this course is to teach you how to perform a cost-benefit analysis that can be applied to program evaluation in the public sector and business decision-making in the private sector. We will discuss the key CBA steps and apply them to real-world analyses. The course meta-goals therefore include: Determining when a cost benefit analysis may be performed in a meaningful way; Performing the analysis as completely as possible, given relevant modeling assumptions or approximations;  Identifying limitations in modeling assumptions, data or political concerns that may compromise the validity of the study;  Communicating the results of the cost-benefit analysis to stakeholders in such a way as to facilitate political or administrative processes. You will find that there is often a tension between the “textbook” notion of CBA that relies on technical assumptions to apply microeconomic methods, and real-world concerns about CBA, policy analysis and politics that may limit the utility of any given analysis. Examining this tension will help us better understand the promise and limits of quantitative analysis for policy design.  

Course Materials  

Required Textbook: Cost-Benefit Analysis: Concepts and Practices, 5th edition, by A. Boardman, D. Greenberg, A. Vining, D. Wiemer, Cambridge University Press Website: If you are registered for this course, you can use your directory ID and password to access www.elms.umd.edu. Copies of this syllabus, lecture notes, and other relevant documents will be made available through the course website.

Prerequisites: 1 course with a minimum grade of C- from (ECON305, ECON306, ECON325, or ECON326); and 1 course with a minimum grade of C- from (ECON230, BMGT230, ECON321, or STAT400). Approximate Class Schedule Class Meets August 28th September 2nd September 4th Week 3 Week 4 Week 5

Topic (might be updated) Introduction to CBA. No class. Labor Day. Conceptual foundations of CBA. Microeconomic foundations of CBA. Valuing impacts in output markets. Valuing impacts in input markets and secondary markets.

Assigned Chapters Chapter 1 Chapter 2 Chapter 3 Chapter 5 Chapters 6, 7

Week 6 Week 7 Week 8 Week 9 Week 10 Week 11 Week 12 Week 13 November 25th November 27th December 2nd December 4th December 9th December 13th

Discounting. Estimation of demand. Dealing

with uncertainty. Dealing with uncertainty. Review. Midterm. MATLAB introduction. Social discount rate. Option price and option value. Existence value. Contingent valuations. Value of life. No class. Thanksgiving break. Value of life.

Chapter 9 Chapters 4, 11 Chapter 11

Slides Chapter 10 Chapter 12 Chapter 13 Chapter 16, slides Slides Slides

Presentations. Presentations. Final.

Coursework Problems Sets (20%): There will be four problem sets assigned throughout the semester. Two problem sets are in the paper form and are due at the beginning of class on the designated due date (see below) and all work should be stapled together with your name on each page to avoid losing points due to missing pages. Two problem sets will require online submission through ELMS. Students are allowed to give and receive help on the problems. However, students are NOT allowed to copy part or all of another student's problem set or allow another student to copy part or all of his/her own problem set. Journal Article Summary and Analysis Paper (15%): The textbook authors have compiled a large list of related research articles on a variety of topics (see Notes at the end of each chapter). You can use any of the research articles from the book or select another article from peer reviewed academic journal, but it needs to be approved by me. You will choose one article to read and write a short paper (4-8 pages) on the article. You will summarize the findings and methods used in the article, analyze the results, and connect the article to at least two topics that we have discussed in class. Program Evaluation/Cost-Benefit Analysis Presentation (15%): One of the goals in this course is to prepare you to be able to apply the tools of program evaluation and cost-benefit analysis and then present your findings to a non-economist audience. For this assignment, you will be asked to work with 1 classmate to conduct your own program evaluation and/or cost benefit analysis and prepare a 12-minute presentation that summarizes your analysis and connects the issues discussed to topics covered in class. The topic of presentation must be different from paper analysis assignment.

Midterm Exam (20%): The midterm exam will be a comprehensive, closed book exam covering ALL material discussed throughout the first half of the course, including lecture slides, textbook (chapters 1-7, 9, 11) and other reading material, in-class assignments and problem sets. Under University regulations, a make-up exam is allowed under only three circumstances—religious holidays, illness supported by a doctor’s letter, and participation in University activities at the request of University authorities. Please let me know as soon as possible if a conflict with the midterm exam date is expected. Final Exam (30%): The final exam will be 120 minutes in length. The exam will be a comprehensive, closed book exam covering ALL material discussed throughout the course, including lecture slides, textbook and other reading material, in-class assignments and problem sets.

Assignment and Test Dates Assignment Problem Set 1 Problem Set 2

Due (approximate) September 18th October 2nd

Assignment Problem Set 4 Paper Analysis

Problem Set 3

October 23rd

Presentation

Midterm Exam

October 28th

Final Exam

Due (approximate) November 13th Topic selection is due: November 20th Analysis is due: December 2nd or December 4th December 4th or December 9th Friday, December 13th 1:30 – 3:30 pm

Note, late assignments will receive 20% deduction per day. For example, if an assignment is graded out of 100 points, then being one day late results in maximum of 80 points, 2 days late results in maximum of 60 points. If an assignment requires online submission, it is your responsibility to ensure file has been uploaded correctly and on time. Corrupt files will receive a grade of 0. Note, there are two dates for Papewr Analysis and Presentation assignments. Your paper analysis due date will be one class before your presentation. If you sign up to present on December 4th, then your paper is due on December 2nd. If you present on December 9th, then your paper is due on December 4th.

University of Maryland and Department of Economics Policies Please see http://www.ugst.umd.edu/courserelatedpolicies.html for complete details. The page also includes links to resources related to each policy. Please familiarize yourself with the information on this page.

Honor: The University of Maryland, College Park has a nationally recognized Code of Academic Integrity, administered by the Student Honor Council. This Code sets standards for academic integrity at Maryland for all undergraduate and graduate students. As a student you are responsible for upholding these standards for this course. It is very important for you to be aware of the consequences of cheating, fabrication, facilitation, and plagiarism. For more information on the Code of Academic Integrity or the Student Honor Council, please visit http://www.shc.umd.edu. Student Conduct: Students are expected to treat each other with respect. Disruptive behavior of any kind will not be tolerated. Students who are unable to show civility with one another or myself will be referred to the Office of Student Conduct. You are expected to adhere to the Code of Student Conduct. Medical Excuses: University policy requires students who are absent due to illness/injury to furnish documentary support to the instructor. I ask students to contact me by email or by phone prior to class time to indicate that you have an illness or injury. For a single missed class, an email or phone call will suffice. For illness or injury that causes a student to miss more than one consecutive class, you must provide written documentation verifying your illness/injury immediately upon your return to class. You will not be allowed to turn in missed assignments or make up exams if you have not provided this documentation. Documentation must be presented to me in a timely manner or it will not be accepted. In addition, if it is found that you have falsified the documentation provided, I will refer you to the University’s Student Conduct Office. Counseling Center: The Counseling Center in Shoemaker Hall provides comprehensive support services that promote personal, social, and academic success of UMD students. The cost of these services is covered by registration fees you already paid, so there is no additional charge if you use these resources. Proactively explore the range of services available including the Counseling Service, the Disability Support Service, the Learning Assistance Service, and the Testing Office, all described at http://www.counseling.umd.edu/. Students with Learning, Emotional, Psychological and Physical Disabilities: I will accommodate students who are registered with the Disability Support Services (DSS) Office and who provide me with a University of Maryland DSS Accommodation form....