Benefit Cost Ratio

Definition

Health Economics

  • A statistic commonly used to describe the conclusion of a cost-benefit study. It is the ratio of the present value of benefits to the present value of costs. Given that the classification of some entities as costs or negative benefits, and benefits or negative costs, is ambiguous, the ratio can be a misleading indicator of efficiency and, as a ratio, it gives no indication of the size of the benefits or costs in question. It is usually better to use the difference between the present values rather than their ratio, at the marginal costs and benefits rather than the totals and to use an explicit comparator.
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