Ten-Year Impacts of Burkina Faso’s BRIGHT Program

V. COST-EFFECTIVENESS AND COST-BENEFIT ANALYSIS MATHEMATICA POLICY RESEARCH
Once we have the increased earnings for each cohort, we add up the additional earnings
gained by all cohorts in the given year. So, for example, in 2009, only the 1994 cohort
experiences an increase in earnings, whereas in 2010, the 1994 and 1995 cohorts are earning
more. We then use the 10 percent discount rate to calculate the net present value of these
earnings (as we did for the costs in each year); we present them in the second row of panels A
and B in Table V.8.
Finally, we can compare the costs and benefits. First, we calculate the net benefits by
subtracting the costs from the benefits. These are presented in the third row of each panel. The
relative costs and benefits can also be compared by dividing the benefits by the costs to produce
the benefit-cost ratio, which is presented in the fourth row of each panel. If the benefits exceed
the costs, the net benefits are positive and the benefit-cost ratio is greater than one. Based on
these estimates, benefits do not exceed costs for any of the scenarios.
Table V.8. Benefit-cost estimates of the BRIGHT program per village
Benefit scenarios
Cost scenarios High return to schooling Low return to schooling
Panel A: High traditional government school cost
Total six-year marginal benefits in 2006 $86,959 $37,607
Total six-year marginal costs in 2006 $126,742 $126,742
Net benefits a -$40,783 -$89,135
Benefit-cost ratio b 0.68 0.30
ERR c 8% 4%
Panel B: Low traditional government school cost
Total six-year marginal benefits in 2006 $86,959 $37,607
Total six-year marginal costs in 2006 $194,650 $194,650
Net benefits a -$108,691 -$157,043
Benefit-cost ratio b 0.44 0.19
ERR c 6% 3%
Note: The estimates of benefits and costs are carried out at the village level, which was the level of implementation of
the BRIGHT program.
a
Calculated by subtracting total costs from total benefits.
b
Calculated by dividing total benefits by total costs.
c
This is the discount rate at which the net benefits are equal to zero.
As explained in Section A of this chapter, these estimates assume a fixed discount rate. A
different way to calculate the relative gain from the project is to determine the discount rate that
is large enough that the net benefits are equal to zero. This is the discount rate at which the net
present value of the costs equals the benefits. To do this, we take the costs and benefits for each
year calculated for the benefit-cost ratio as we describe above, but instead of using a discount
rate of 10, we determine the discount rate that balances the net present value of each. These
values are provided in the fifth row of both panels in Table V.8.
The estimated ERRs range between 3 percent and 8 percent. When we assume that the
return to schooling is high, the ERRs are 8 percent in the high-cost traditional government
schools scenario and 6 percent in the low-cost traditional school scenario. For the assumption of
64