Benefit Cost Analysis

Benefit cost analysis (BCA) is an accounting framework used to evaluate the financial consequences of decisions. Its primary objective is to improve public welfare, and often the data used to perform BCA cannot be easily quantified since they are non-market goods. BCA of administrative data can be used to determine whether social policy initiatives warrant continued investment or if they are wasteful. Currently, BCA on social policy is lacking; however, the use of integrated data systems for BCA has the potential to change this, as integrated data provide a rich source of administrative data on social programs that can be used relatively cheaply to perform BCA, which would result in more efficient policy-making.

Best Practice Paper“A Primer for Understanding Benefit-Cost Analysis”

All financial analyses entail a tradeoff between the cost of the analysis and the value of information gained. A comprehensive BCA can be resource intensive, especially for social policy initiatives, where benefits (and costs) typically accrue in non-market arenas. In the social services arena, collection and generation of data can be time-consuming and expensive. This serves as a barrier to broader implementation of BCA, as proper data collection can make BCA appear cost-prohibitive. Where available, integrated data systems can reduce the funding needed to conduct benefit-cost analysis and discover worthwhile projects that otherwise might not have been found.

This paper demonstrates how data integration impacts BCA in three ways:

  1. BCA Usage
  2. Presentation of Basic Methodological Framework
  3. Provide a simplified example of a BCA that demonstrates relevant concepts and speaks to the challenges faced in seeking to expand BCA usage.
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