Employment-based analysis: an alternative methodology for project evaluation in developing regions, with an application to agriculture in Yucatan

Governmental and non-governmental organizations (NGQs) in developing regions increasingly recognize the links between sustainable development and environmental protection. For this reason, environmental protection efforts in these regions increasingly include sustainable community development projects. Unlike most traditional, large-scale development projects, the objective of such projects is to give local inhabitants sustainable economic alternatives to environmentally degrading activities, rather than to maximize the flow of discounted net benefits. The traditional method of project evaluation, cost-benefit analysis (CBA), does not provide useful information regarding the meeting of such objectives. The purpose of this paper is to introduce, discuss, and provide a brief example of employment-based analysis (EBA) as a means of project evaluation in developing countries. In contrast to the CBA approach of measuring a discounted flow of net benefits from economic options, EBA measures the number of jobs or population support provided by alternative activities using a given resource (typically land) over a given period of time. EBA better incorporates sustainability into project analysis by avoiding the use of discounting, directly linking project success with environmental sustainability, and penalizing economic activities that involve income inequality and income/capital flight. EBA is particularly illuminating when applied to small-scale sustainable development projects that are part of environmental conservation programs. After a brief description of the methodology, the motivation, strengths, and weaknesses of EBA are discussed. A simple application of EBA and CBA to alternative agricultural activities (traditional farming, improved farming, and cattle ranching) in Yucatan, Mexico, is then provided. This analysis indicates that, while cattle ranching has a higher benefit-cost ratio, both traditional and improved farming provide more population support and greater contributions to sustainability. This example serves to highlight the potential benefits to using EBA instead of or in conjunction with CBA in developing regions, along with highlighting some of the strengths and challenges of EBA. (C) 2001 Elsevier Science B.V. All rights reserved.