Ranking of regional road investment in Norway

Abstract

This paper explores the priorities for road investments in Norway, with particular emphasis on the use of benefit-cost calculus. The author tests whether the observed rankings of the Ranking Road Agencies are explained and/or influenced positively by the benefit-cost ratio. Second, based on a questionnaire survey, the tradeoff made by Regional Road Authorities between an economic welfare maximizing strategy and the observed strategy in analysed. Benefit-cost ratio is found to be a significant explanatory variable in only four out of fifteen regions. In only one region does benefit cost ratio explain more than 30 percent of the observed variation. The trade-off analysis demonstrates that ranking by benefit-cost ratio if adopted gives formidable return as compared to the observed rankings. The reasons given by the Regional Road Agencies for not ranking investment projects according to benefit cost ratio is that several important impacts are not valued monetarily and therefore are not included in the benefit-cost-ratio. The results of the questionnaire survey give reasons to doubt the Regional Road Agencies understanding of the welfare maximizing principles of benefit cost calculus. Concluding remarks on the observed behaviour of the Regional Road Agencies are also offered.