The inclusion of indirect social benefits in project rates of return

The author uses input-output techniques to estimate the backward (induced) and forward (stemming) linkage effects of a project. He shadow-prices the export, import and wages vectors in the first and third quadrants of the input-output table. He then adds or subtracts the resulting social net gains or losses arising in the linked sectors to the net benefit stream of the project which initially stimulates these indirect effects.Reasons for doing this are given and reservations with regard to the methodology are presented. The technique is, perhaps, best used to show what types of schemes are most likely to have the higher overall social rates of return rather than as a methodology to be incorporated in individual project appraisals. This may be more useful at the project identification rather than the project appraisal stage.