York University Cost Benefit Analysis Term Report Paper

Term CBA Report Guide

The purpose of the term CBA report is for you to demonstrate how to do a cost-benefit
analysis. Your role is that of a policy analyst. Your assignment is to motivate and
describe a potential reform to government policy to your political bosses, to evaluate
the reform via an economic cost-benefit analysis and political feasibility considerations,
and to advise acceptance / rejection / or further study. Your reform can be in any area in
public expenditure or regulation that interests you. Your term CBA report represents the
first draft of your analysis that you provide your boss for review. It should be complete
in overall structure and have enough detail to convince your boss that you know what
you are doing, but it will not necessarily contain all the detailed information needed in a
finished report.
Illustration of report topics (these are just examples; please choose your own topic):
1. Expenditure Area: Education
Reform Idea: The U.S. has a %ad Start%ducation program targeted at disadvantaged
kids. Ontario should introduce a similar program.
2. Expenditure Area: Pensions
Reform Idea: Since 1981, more than 30 countries fully or partially replaced their state-
run pay-as-you-go public pension systems with ones based on individually owned
private pension savings accounts. A supplemental CPP plan should be created with
contributions going to individual pension savings accounts, mandatory for workers
without an employer pension plan.
3. Expenditure Area: Welfare
Reform Idea: Sweden has a state-owned company Samhall AB, founded in 1980, and
mandated to provide sheltered employment for people with disabilities (intellectual,
mental, or physical) and to help those that can move on to jobs in the private sector.
Ontario should introduce a similar program.
How to find a topic
You may already have a reform idea from your research earlier in the course. If not, pick
an expenditure area and search for ¥forms4o that area that have been implemented
in different provinces, states, or countries and adapt one of these reforms to Ontario or
Canada. In the public sector, your political bosses will always want to know what others
have done, so it is a good idea to look even if you already have a reform in mind.
Another route to reform ideas is to search for cost-benefit analyses that have already
been published in the expenditure area you are interested in. These are all evaluations
of some reform. You might adapt their reform to the Ontario or Canadian context. Your
political bosses are also interested in knowing the results of other related cost benefit
analyses. It is a good idea to look even if you have a reform in mind because you might 

find tips and reminders of what to include in your own analysis. Include the published

CBA analyses that you reference in your bibliography.
It is of course easier to do a cost-benefit analysis on a simple rather than a complex
reform. If you are adapting a reform from somewhere else, choose a small but
significant part of it for your reform to analyze for this report. You can put your reform
in the context of a bigger potentially desirable reform in the introduction of your report.
Your report should include the following elements:
(a) Introduction…

otivation … Why is the issue you are addressing interesting or important?
ontext … Describe the expenditure program or regulation as it exists, its
shortcomings and strengths, what reforms (related to yours) have been tried
elsewhere and their success, and the local political, cultural, institutional
constraints on reform. Include definitions and current and historical statistics if
helpful. Don state your own opinions as fact, but preface with `think¼br>
Support your statements as much as you can with what other researchers have
said and the solutions they have suggested. Other research opinion should be
suitably referenced and footnoted. Please don include extraneous detail.
tatement of your reform proposal … Clearly and concretely define exactly the
change you are proposing.
(b) Cost Evaluation…
The costs of implementing the reform you are proposing and the incremental cost of
operating the reformed program must be described thoroughly and thoughtfully in
general terms (i.e. without numbers) first. Please avoid trivia. Include only reasonable
and important costs. You must choose at least one major cost item to discuss in detail
and to estimate. Discuss how you could measure the cost. Discuss what approximate
measures you might have to settle for if ideal measures were not available. Pick out
data from your research and actually estimate the $cost you are discussing in detail. Do
this for more costs if you can. Justify all assumptions you make.
If the costs are occurring over time, take a present value of total cost. Justify your
discount rate and the time frame over which you are taking the present value. If the
ongoing costs are similar year after year and the benefits are similar year after year, you
can instead compare one yearàtotal cost vs one yearàbenefit, if you wish. In this case,
compute the annual mortgage payment that would be required to discharge a loan of
the amount of the start-up cost, at a real rate of interest that you justify, and over the
replacement life of the project that you justify. Add the mortgage payment to the
annual operating cost to get the total annual cost.

(c) Benefit Evaluation…
The incremental social benefits of the reform you are proposing must be described
thoroughly and thoughtfully in general terms (i.e. without numbers) first. Please avoid
trivia. Include only reasonable and important benefits. You must choose at least one
major benefit item to discuss in detail and to estimate. Discuss how you could measure
the benefit. Discuss what approximate measures you might have to settle for if ideal
measures were not available. Pick out data from your research and actually estimate the
$benefit you are discussing in detail. Do this for more benefits if you can. Any operating
costs saved from replacing the old program are benefits of the reform. Government is
not a person in the society, just an agent of the people, so don include any transfers
(e.g. extra revenue) to government as benefits. Justify all assumptions you make.
If the benefits are occurring over time, take a present value of total benefit. Justify your
discount rate and the time frame over which you are taking the present value. If the
benefits are similar year after year, and the operating costs are similar year after year,
you can just compare one yearàbenefits to one yearàtotal cost, as described above.
(d) Summary and Other Important Considerations…
Compare the $cost to the $benefit. If you have analyzed what you believe to be the
major cost and major benefit, you might be in a position to draw a preliminary
conclusion about whether to accept or reject the reform based on economic
considerations. If you can make a preliminary conclusion, summarize what further
data gathering and analysis is required before you can do so (in a later draft).
Remind your reader that some other issues may also affect your final recommendation.
onstraints on implementation … This includes fairness considerations, and
political/institutional/cultural norms that might limit what can actually be
implemented or how it can be implemented. These constraints may affect the
projected costs or benefits attainable.
mplementation plan and evaluation plan … These will add some costs to the
project as well as providing valuable feedback.
(e) Bibliography… Use only professional sources to support your evaluations and
assessments. If you use casual sources for colour, identify them as such.
Source material:
In researching your topic, look at all the sources listed in the professional research
sources guide for program information, statistics, comparisons to other countries,
evaluations, or ideas for reform. If you feel this is not enough, look at academic
textbooks or academic papers on the subject. If you want to use information from sites
on the internet other than the ones listed on your research resources, please email to
check them out.Footnote any direct quotes. Attribute any major ideas or statistics with an author and

date reference (e.g. [Brown, 1989] estimated that ….). Include only sources you
reference in your report in your bibliography. Thoroughness in referencing is important.
The department chair has told me to remind you that any plagiarization will cause an
automatic failure of the course and must be reported to the Dean, so be careful to
attribute appropriately. The electronic version of your paper may be submitted to a
source the university subscribes to that checks for plagiarism. Check with TLS to verify
your understanding of what constitutes plagiarism.
Look at example cost-benefit analyses from the literature, posted cost benefit analyses,
and topic 5 notes for ideas of what kind of costs and what kind of benefit to include in
your analysis, and how to quantify them.
Evaluation Pointers:
1. Bibliography (appropriate sources, enough sources, complete documentation of
sources: i.e. author, title of article or paper, title of publication, publisher, date of
publication, website). Casual sources such as newspapers should be listed in a separate
section. Casual sources inappropriately used will result in a zero mark for this section.
3. Cost analysis: You might not be able to get numbers for all costs, but describe what
the costs are and how they might be numerically evaluated (in some future draft of your
report). Absence of numerical work will result in a zero mark for this section.
4. Benefit analysis: You might not be able to get numbers for all benefits, but describe
in detail what they are and how they might be numerically evaluated (in some future
draft of your report). Absence of numerical work will result in a zero mark for this
section.
Marking Scheme:
Component Mark
Available
Mark
Assigned Marking Comments
Introduction 4
Qualitative Costs 4
Quantitative Costs 4
Qualitative Benefits 4
Quantitative Benefits 4
Cost-Benefit Summary 1
Other Considerations 1
Bibliography 3
Total 25