How to Analyze It
Partial budget analysis is useful for documenting changes in financial positions resulting from changes in practice. It is widely advocated as a way for growers, facility managers and other decision makers, to keep track of the results of changes they make. It can readily be used for the same purpose in IPM impact assessment studies. Partial budget analysis can also be used in non-agricultural situations provided the items in the budget associated with pest management can be documented. The list below gives a sample of the tools and guides available for partial budget analysis.
For example, this paper by Brumfield et al. (2000) uses a partial budgeting approach to evaluate integrated crop management with conventional and organic production approaches in several fresh market vegetable crops.
For those who are completely unfamiliar with the idea of partial budget analysis, we suggest reading through this slide presentation by Dr. Paul Mitchell from the University of Wisconsin:
The presentation deals with general agricultural examples, with some pest management examples, but the concepts should be readily transferable to other contexts. A wide range of other resources is also available to facilitate this sort of analysis for IPM projects:
- Farm decision tools from Iowa State Extension
- UMD Partial Budgeting Guide
- Penn State Partial Budgeting Guide
- UW Guide for using Partial Budget Analysis in tight economic circumstances
There are lots of different versions of cost-benefit analysis, varying in their complexity and the detail of the approach. However, one thing they all share is the goal of allowing an objective comparison between alternative courses of action so that one may be selected in preference to another. For this reason cost-benefit analysis may be particularly useful in IPM adoption studies where one goal is to work with a population of potential adopters and determine whether a new IPM practice makes financial sense for them.
For example, this paper by Enkierlin and Mumford (1997) uses benefit cost analysis to evaluate approaches to Mediterranean Fruit Fly control.
As with most of the other approaches for carrying out impact analysis, cost-benefit analysis will probably be most informative where the study includes both an adopting group and a control(non-adopting group). An alternative approach is to carry out a before-and-after cost-benefit analysis with a single group.
For a step by step guide to implementing a cost -benefit analysis, and further guidance please visit Using Cost Analysis In Evaluation at the University of Arizona's online resource for evaluation studies.
Essentially everything that was discussed above for cost-benefit analysis also applies to cost-effectiveness analysis, although there is often less diversity in approaches. As with cost-benefit analysis, the University of Arizona page on cost analyses in evaluation studies provides a good starting point if you want to carry out a cost-effectiveness study, visit Using Cost Analysis In Evaluation.
For example, this paper by Trumble and Alavarado-Rodriguez (1993) cost-effectiveness analysis for an IPM program in tomato in Mexico.
Bear in mind when you carry out a cost-effectiveness analysis that you will be simultaneously comparing alternatives on two scales (cost and effectiveness). The "right" choice may not always be clear from this type of analysis and may require the final decision maker to use additional information in order to make the choice.
For example, in comparing two different pest control approaches you may find that one has a higher cost but results in lower environmental exposure to toxicity than the other. In this type of situation additional criteria for selection will be needed to decide if the reduced risk is worth the extra cost.
Aggregating Results And Recording Variability
The various cost analyses described above can be calculated for each individual in an evaluation study or by aggregated estimates. In aggregated estimates, a value is calculated for hypothetical "average" decision makers (i.e. average growers, school IPM programs, etc.) by collecting consensus information about costs, benefits and efficacies from, for example, focus groups.
However more powerful evaluation of impacts can be obtained from multiple individual participants in an evaluation study, and then you can carry out the cost analysis on each individual's data and summarize the results by calculating the mean (or median) of the group and the variance around the mean (median). Such aggregation of individual data into group summary statistics gives both an idea of typical economic impact, but also the variability in impact.
Estimating the variability in the impact may, in fact, be a key objective in situations when the impact from a new practice depends on an individual's circumstances. The resulting variability in impacts across the population may slow adoption because the practice is seen as "too risky" or not cost-effective, or has an uncertain cost-benefit balance. Where possible, then, you should aim to collect individual-level data and aggregate them into summary statistics for the adopting and non-adopting control groups.
In some cases it may be appropriate to use a case study approach instead of working with adopter and control groups, and seeking to aggregate impacts up to the group level. Case studies focus on a small number of illustrative and representative cases. The advantages of case studies over larger sample approaches are:
- Case studies allow in-depth analysis and have a higher chance of revealing the reasons why decisions are made by participants
- Well-chosen case studies allow a wide range of people to relate the results to their own experience.
- The logistics of running case studies are usually simpler than studies with adopting and non-adopting control groups.
The potential disadvantages of using a case-study approach as basically the opposite of the advantages. Case studies run the risk of providing detailed information about unrepresentative examples if they are not carefully chosen. With only one, or a small number of examples to assess, it can be difficult to extrapolate from case-studies to a wider population. Irrespective of whether you opt for a case-study approach or a larger sample size the basic elements needed to carry out a simple economic impact analysis are the same.
More Advanced Analyses
The approaches described above are relatively simple. The difficult parts may be in collecting the necessary information. A wide array of more advanced economic analyses is, of course, available. In keeping with the focus of this toolkit we do no more here than list a few methods and provide some further reading which you can use to learn about these approaches if you are not familiar with them. As ever, we stress that if you want to use these more advanced methods you should contact a professional economist or quantitative social scientist and seek to collaborate with them in designing and implementing your research and evaluation studies (See "How to Engage a Social Scientist/ Economist Section).
More advanced analyses might include:
- Partial equilibrium
- General equilibrium
- Correlation-causation / Identification
- Risk Uncertainty analysis and Breakeven probabilities
- DEA-PCA (Data Envelopment Analysis- Principal Component analysis)
The article below gives a good overview on some of these methods in a pest management context.
A Quick Reminder Of Important Points To Bear In Mind
First Step to economic analysis --- choose the level of analysis you want
- This will dictate the answer to the questions of what to collect
- Questions need to be specific, measurable and on a timeline
- Keep in mind your resources and pre-requisites