Top-down versus bottom-up project appraisal processes, and external review

Evidence from Norway and China

Abstract

Project appraisal plays an important role in choosing the right project and is crucial for the success of public investment projects. Different factors may affect the choice of appraisal process in different countries. By use of simple game-theoretical models, the article aims to answer two questions: Why do countries adopt different public investment appraisal processes, such as top-down versus bottom-up processes? Why do different countries share similar features, such as external review, in the public investment appraisal process? Two selected countries, China and Norway, are used as case studies. The results illustrate that a country’s political system and social norms play important roles in determining the selection of a project appraisal process. However, external review schemes such as external evaluation by consulting companies and experts can be optimal in both top-down and bottom-up project appraisal processes.