EIB UNIVERSITY RESEARCH SPONSORSHIP PROGRAMME

COST BENEFIT ANALYSIS IN THE RESEARCH, DEVELOPMENT AND INNOVATION SECTOR

UNIVERSITY OF MILAN - DEPARTMENT OF ECONOMICS, MANAGEMENT AND QUANTITATIVE METHODS

UNIVERSITY OF MILAN - DEPARTMENT OF PHYSICS CSIL - CENTRE FOR INDUSTRIAL STUDIES

Luxembourg, 23 April 2015

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• Developing a CBA theoretical model for evaluating research infrastructure (RI)

• Testing the CBA model on two case studies

• Enabling funding agencies to assess the potential future net social benefits generated by a RI

GOALS OF THE STUDY

2 SSC (abandoned) ISS International Space Station LHC Large Hadron collider

The E(NPV) of research infrastructures over the time horizon 𝒯 is defined as the expected difference between benefits and costs valued at shadow prices and discounted at the social discount rate 𝑟. It can be decomposed in two parts: the expected net present value of use-benefits and costs NPV𝑢 and the expected (non-use) social value of discovery 𝐵𝑛. We drop the expectation operator, but all variables are to be considered as stochastic.

THE MODEL

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𝑩𝒖 = Knowledge creation + Technological spillovers + Human capital formation + Cultural effects + Services provided by applied RI

𝑪𝒖 = Investments + Operational costs

𝑩𝒏 = Existence value + Quasi option value

𝑁𝑃𝑉𝑅𝐼 = 𝑁𝑃𝑉𝑢 + 𝐵𝑛 = 𝑃𝑉𝐵𝑢 − 𝑃𝑉𝐶𝑢 + 𝐵𝑛

BENEFITS

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Knowledge

output

(S)

Technological

externalities

(T)

Cultural

effects

(C)

Human capital

formation

(H)

The present value of use-benefits and costs NPV𝑢 is the sum of the economic value of:

The non-use benefits 𝑩𝒏 captures two types of benefits related to the social value of discovery:

the quasi-option value 𝑄𝑂𝑉𝑡

& the existence value 𝐸𝑋𝑉𝑡

Services provided by applied RI (A)

Pure research infrastructure

Applied research infrastructure

TWO PILOT CASE STUDIES

CERN Large Hadron Collider (LHC), Geneve

National Hadrotherapy Center for Cancer Treatment (CNAO) in Pavia, Italy

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0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

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-863,076 847,853 2,558,782 4,269,712 5,980,641 7,691,570

(thousand Euro)

Cumulative Distribution Function

Cumulated probability Mean Median Std. Dev. from mean

(thousand Euro)

# Pathology Clinical alternative Type of

benefit

Marginal

percentage of

patients who fully

recover compared

to the

counterfactual

situation identified

in the third column

(for benefit of

TYPE 1)

Number of life

years gained

thanks to

hadrontherapy

with respect to the

counterfactual

situation identified

in column 2(for

benefit of TYPE 2)

1 Proton radiation therapy for

chordomas and chondrosarcomas

of the skull base

No alternative TYPE 1 73% -

2 Proton therapy of spine chordoma

and chondrosarcoma No alternative TYPE 1 73% -

3 Proton therapy of intracranial

meningioma No alternative TYPE 1 33% -

4 Proton therapy of brain tumors No alterative* TYPE 3 - -

5 Proton therapy of recurrent

cervico-cephalic area tumors No alterative* TYPE 3 - -

6 Proton boost for locally advanced

cervico-cephalic area tumors

No alternative for

advanced tumours TYPE 2 15% 5

7 Proton therapy of glioblastoma No alterative TYPE 3 100% 1

8 Proton re-irradiation of recurrent

spine chordoma and

chondrosarcoma

No alterative TYPE 2 43% 3

9 Carbon ion therapy of adenoid

cystic carcinoma of salivary

glands

Surgery + photon

therapy TYPE 1 45% -

10 Carbon ion re-irradiation of

recurrent pleomorphic adenomas Surgey TYPE 1 21% -

• 1020 interviews at students (Milan, Paris, Exeter, a Coruña)

• 280 interviews at PhD students and Post-docs at Cern

• More than 1oo interviews with scientists, managers, experts, firms

• More than 15 researchers involved in the project

ACTIVITIES IN NUMBERS

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• 4 published working papers

• 4 forthcoming working papers

• An operational manual

• XIII Milan European Economy Workshop «The cost-benefit analysis of research infrastructures», 12-13 June 2014

• Presentation of the model at Seventh Annual Conference and Meeting of the Society for Benefit-Cost Analysis, “Advancing the Policy Frontier” - March 19-20, 2015 - Washington, D.C.

• Call for papers for a special issue on Technology Forecasting and Social Change

• Final event in Brussels hosted by DG Research

OUTCOME AND DISSEMINATION

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DISSEMINATION ACTIVITIES

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DISSEMINATION ACTIVITIES

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RESEARCH RESULTS: FORTHCOMING

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DISSEMINATION ACTIVITIES: FORTHCOMING

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THE USE OF COST-BENEFIT ANALYSIS IN THE EVALUATION OF RESEARCH INFRASTRUCTURES AND MAJOR R&D PROGRAMMES

Presenting the results of the research project Cost-Benefit Analysis in the

Research, Development and Innovation Sector, sponsored by the EIB Institute (University Research Sponsorship Programme -EIBURS)

FINAL EVENT

November 13th 2015

DG Research, Brussels

http://www.eiburs.unimi.it/

THANK YOU!

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