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A Study on the Calculation and Issues of Social Costs for Public Investment Projects in Seoul

Kwon, Yong-HoonㆍKim, Bum-Sikㆍ Ko, Kwang-HwaㆍJang, Byung-ChulㆍYeon, Je-seung

This study summarizes the issues of social costs which have been discussed in the economic analysis of Seoul investment projects by topic and suggests social cost calculation that can be used for economic analysis.
  Social costs of public investment projects include project costs, operating costs, and opportunity costs. Among them, Opportunity cost is the value of the best possible alternative and giving up other options.
  Because it is difficult to calculate social costs in economic analysis, experts who analyze the economy have always had an issue calculating it. The scope and calculation of these social costs can affect the outcome of benefit/cost (B/C Ratio) and confuse the Seoul Budget Department's policy judgment.
  Urban Seoul is characterized by a high cost of land and a lack of sites for investment projects, so utilization of facility space is important. Therefore, considering that there are many complex projects of facilities, there are numerous issues of social cost calculation on economic analysis.
  The social cost issues of investment projects are divided into three main categories. First, to calculate land compensation costs, there are issues related to scope calculation of reasonable compensation for land including obstacles on land. Second, after a project planning, the construction costs may increase due to the occurrence of civil complaints and materialization of the project plan, and calculation of the proper residual value of major facilities. Third, there are problems in calculating the accident cost of pedestrians due to an increase in traffic in residential improvement projects and the social cost of external effects such as noise, odor, and atmosphere in environmental projects.
  The scope of social costs in this study focuses on the project costs available for economic analysis and includes some of the costs which can be calculated for external effects of economics. Social cost estimation in this study introduces the issue of social cost and presents legal cost and engineering cost estimation methods for cases.
  Therefore, this research can serve as the basic data necessary for economic analysis such as project cost calculation method, land compensation cost, and obstacle compensation cost calculation, opportunity cost calculation method according to facility space utilization, accidental and environmental cost calculation method due to external effects.