nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2022‒01‒31
seven papers chosen by
Arvi Kuura
Tartu Ülikool

  1. Public Investment Management in the EU Key Features and Practices By Cristiana Belu Manescu
  2. The Cost-Benefit Fallacy: Why Cost-Benefit Analysis Is Broken and How to Fix It By Bent Flyvbjerg; Dirk W. Bester
  3. Bids for Speed: An empirical Study of Investment Strategy Automation in a Peer-to-Business Lending Platform By Eric Darmon
  4. Modeling Alternative Approaches to the Biodiversity Offsetting of Urban Expansion in the Grenoble Area (France): What Is the Role of Spatial Scales in ‘No Net Loss’ of Wetland Area and Function? By Anne-Charlotte Vaissière; Fabien Quétier; Adeline Bierry; Clémence Vannier; Florence Baptist; Sandra Lavorel
  5. Negative results in science: Blessing or (winner's) curse? By Catherine Bobtcheff; Raphaël Levy; Thomas Mariotti
  6. The identification of Smart Specialisation priority domains in Serbia By RADOVANOVIC Nikola; MATUSIAK Monika; KLEIBRINK Alexander
  7. Assessing Climate-Related Financial Risk: Guide to Implementation of Methods By Hossein Hosseini; Craig Johnston; Craig Logan; Miguel Molico; Xiangjin Shen; Marie-Christine Tremblay

  1. By: Cristiana Belu Manescu
    Abstract: The paper addresses the fundamental question of what makes public investment management efficient. It defines public investment as tangible and intangible fixed assets plus ordinary maintenance and repairs and distinguishes the following salient phases: strategic planning, project selection, medium-term budgeting, implementation and ex-post reviews. For each of these phases, the paper provides some examples of good practice in the EU, complemented with insights from the implementation of EU cohesion policy. Finally, the paper identifies significant data gaps both within and across EU countries.
    JEL: H54 H82 H41 H3
    Date: 2021–12
  2. By: Bent Flyvbjerg; Dirk W. Bester
    Abstract: Most cost-benefit analyses assume that the estimates of costs and benefits are more or less accurate and unbiased. But what if, in reality, estimates are highly inaccurate and biased? Then the assumption that cost-benefit analysis is a rational way to improve resource allocation would be a fallacy. Based on the largest dataset of its kind, we test the assumption that cost and benefit estimates of public investments are accurate and unbiased. We find this is not the case with overwhelming statistical significance. We document the extent of cost overruns, benefit shortfalls, and forecasting bias in public investments. We further assess whether such inaccuracies seriously distort effective resource allocation, which is found to be the case. We explain our findings in behavioral terms and explore their policy implications. Finally, we conclude that cost-benefit analysis of public investments stands in need of reform and we outline four steps to such reform.
    Date: 2021–10
  3. By: Eric Darmon
    Abstract: We investigate how introducing a bidding agent impacts the process and outcome of an online reverse auction in the context of a crowdlending platform. We consider this issue in the context of a peer-to-business platform that connects individual lenders to small and medium-sized enterprises. Using a before/after study design, we perform an econometric analysis and find that introducing a bidding agent had a positive and dramatic impact on the number of bids and bidders and reduced the time necessary to collect the funds. For projects with lower ratings, it also positively impacted the number of lenders and indirectly enhanced portfolio diversification. We find that after the bidding agent was introduced, well-rated projects benefited from lower interest rates, the magnitude of the change depending positively on their rating. These results provide evidence that the bidding agent generates savings in the screening and bidding costs incurred by lenders and benefits both sides of the platform. Our contribution documents the role of bidding agent as a strategic tool to enhance financial intermediation. It also sheds light on how two types of decision support systems (rating-based and bidding agent) interact and shows that this interaction is of crucial importance with respect to the financial regulation of platforms if the crowd has low financial literacy.
    Keywords: decision support system; crowdlending; bidding agent; online reverse auction.
    JEL: D44 D83
    Date: 2022
  4. By: Anne-Charlotte Vaissière (ESE - Ecologie Systématique et Evolution - AgroParisTech - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique); Fabien Quétier (Biotope [Mèze]); Adeline Bierry (LECA - Laboratoire d'Ecologie Alpine - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes); Clémence Vannier (LECA - Laboratoire d'Ecologie Alpine - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes); Florence Baptist (Biotope [Mèze]); Sandra Lavorel (LECA - Laboratoire d'Ecologie Alpine - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes)
    Abstract: It is increasingly common for developers to be asked to manage the impacts of their projects on biodiversity by restoring other degraded habitats that are ecologically equivalent to those that are impacted. These measures, called biodiversity offsets, generally aim to achieve ‘no net loss' (NNL) of biodiversity. Using spatially-explicit modeling, different options were compared in terms of their performance in offsetting the impacts on wetlands of the planned urban expansion around Grenoble (France). Two implementation models for offsetting were tested: (a) the widespread bespoke permittee-led restoration project model, resulting in a patchwork of restored wetlands, and (b) recently-established aggregated and anticipated "banking" approaches whereby larger sets of adjacent parcels offset the impacts of several projects. Two ecological equivalence methods for sizing offsets were simulated: (a) the historically-prevalent area-based approach and (b) recently introduced approaches whereby offsets are sized to ensure NNL of wetland functions. Simulations showed that a mix of functional methods with minimum area requirements was more likely to achieve NNL of wetland area and function across the study area and within each subwatershed. Our methodology can be used to test the carrying capacity of a landscape to support urban expansion and its associated offsetting in order to formulate more sustainable development plans.
    Date: 2021–06
  5. By: Catherine Bobtcheff (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Raphaël Levy (HEC Paris - Ecole des Hautes Etudes Commerciales); Thomas Mariotti (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CNRS - Centre National de la Recherche Scientifique)
    Abstract: Two players receiving independent signals on a risky project with common value compete to be the first to invest. We characterize the equilibrium of this preemption game as the publicity of signals varies. Private signals create a winner's curse: the first mover suspects that his rival might have privately received adverse information, hence exited. To compensate, players seek more evidence supporting the project, resulting in later investment. A conservative planner concerned with avoiding unprofitable investments may then prefer private signals. Our results suggest that policy interventions should primarily tackle winner-takes-all competition, and regulate transparency only once competition is sufficiently mild.
    Date: 2022–01
  6. By: RADOVANOVIC Nikola (European Commission - JRC); MATUSIAK Monika (European Commission - JRC); KLEIBRINK Alexander
    Abstract: The report documents the findings of the analytical phase of development of the Smart Specialisation Strategy for Serbia, implemented with the methodological and financial support of the Joint Research Centre of European Commission (JRC). The analysis follows the Smart Specialisation Framework for EU Enlargement and Neighbourhood Region (Matusiak and Kleibrink, 2018) and has two complementary parts: the quantitative mapping aims to identify the potential Smart Specialisation priority domains based on the set of indicators showing critical mass, specialisation and growth rates in subsectors of economic activity and specialisation in science, technology and innovation outputs. The results of this analysis are in a second step verified through a qualitative mapping, based on structured interviews, focus groups and case studies. Both analyses provide a sound base for the following entrepreneurial discovery phase of the strategy development. The findings from both analyses represented key inputs for the upcoming stakeholder dialogue under the Entrepreneurial Discovery Process (EDP).Serbia decided to introduce the Smart Specialisation approach into the development of its innovation policy in 2016. Guidance and technical support has been provided by the Joint Research Centre ever since, based on the Smart Specialisation Framework for the EU Enlargement and Neighbourhood Region. Serbia created its National Smart Specialisation team for coordinating the Smart Specialisation process and it has run the process until the strategy was adopted in February 2020. The analytical team of the National Smart Specialisation Team of Serbia played an important role in providing expert support and developing local capacities for both the quantitative mapping, conducted by the Fraunhofer ISI, and the qualitative mapping. Another important contributor was the National Statistical Office of Serbia, which provided necessary disaggregated data sets which made the analysis possible. The quantitative mapping revealed several primary and secondary preliminary priority areas which were further analysed in the qualitative mapping phase. The qualitative analysis set out four final priority domains with sub-areas for Smart Specialisation in Serbia.
    Keywords: mapping, smart specialisation, serbia, innovation
    Date: 2021–12
  7. By: Hossein Hosseini; Craig Johnston; Craig Logan; Miguel Molico; Xiangjin Shen; Marie-Christine Tremblay
    Abstract: The Bank of Canada and the Office of the Superintendent of Financial Institutions completed a climate scenario analysis pilot project with the collaboration of six Canadian financial institutions. The project aimed to increase understanding of the financial sector’s potential exposure to risks in transitioning to a low-carbon economy and to help build the capabilities of authorities and financial institutions in assessing climate-related risks. To support the broader financial-sector community in building these capabilities, this report provides detail on the methodologies the pilot used to assess credit and market risks, which were informed by the financial impacts generated by the climate transition scenarios. The method to assess credit risk combined top-down and bottom-up approaches. Variables from the climate transition scenarios were first translated into sector-level financial impacts. The financial institutions then used these impacts to estimate the implications on credit outcomes through borrower-level assessments. Using the transition scenarios’ financial impacts, and the stressed credit outcomes, the project estimated a relationship between climate transition information and credit risk. This was used to calculate expected credit losses at the portfolio level. The method to assess market risk was solely top-down. Using the scenario analysis, the project used a dividend discount model to estimate sectoral equity revaluations, which it then applied to equity portfolio holdings.
    Keywords: Climate change; Financial stability; Econometric and statistical methods; Credit and credit aggregates
    JEL: C C5 C53 C83 G G1 G32
    Date: 2022

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