Cost-Effectiveness Analysis

CEA compares the cost per unit of effect in a particular project or program option with the costs per unit of effects for alternatives. The comparison between costs and effectiveness will allow the ranking of the alternatives or a comparison with similar interventions or projects. It is important to underline that cost effectiveness measures allow for the ranking of interventions that result in the same effect.

Linkage between objetives and measures of effectiveness

The measure of effectiveness (and cost effectiveness) should be directly linked with the stated objective of the project. In any project, there are many possibilities as to which measure of effectiveness to choose from. Effectiveness selection should be guided by two criteria: reliability and validity.

  • An indicator is said to be reliable if it yields similar results when applied repeatedly on the same individuals or populations. As most measures of effectiveness do not have entirely reliable indicators, it is suggested that the cost effectiveness analysis includes a reasonable range for these effects.
  • An indicator is said to be valid if it has a close match to the underlying impact it is trying to capture.

When the analysis uses intermediate outcomes that have limited validity, it is suggested that the analysis – and justification – for the selected indicator be based on empirical evidence from secondary sources.

Level at which cost effectiveness should be measured

Effectiveness can be measured at both outcome and impact levels. In some cases it can be necessary to resort to intermediate outcomes, if relevant outcome or impact information is scarce. If intermediate outcomes are used, evidence should be presented on the relationship and correspondence of these intermediate outcomes to the expected impact, if the objective is stated in those terms.

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