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The Shadow Wage in Economies with Migrant Labour: The Case of Labour as a Traded Good

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  • Gemmell, Norman
  • Papps, Ivy

Abstract

In order to evaluate the shadow wage used in project appraisal it is usual to consider only the parameters of the domestic labor market based on the, often implicit, assumption that there is a fixed labor force available to the domestic economy. This paper argues that there are many developing countries in which such an assumption is invalid because of large-scale labor migration. Analyses of the labor market in labor-exporting and labor-importing countries shows that the determination of the shadow wage is sensitive to distortions in both domestic and international labor markets, and requires careful consideration of the nature of the domestic labor supply curve. We show that traditional rules for shadow pricing traded commodities, do not necessarily apply to traded labor. Copyright 1991 by Blackwell Publishers Ltd and The Victoria University of Manchester

Suggested Citation

  • Gemmell, Norman & Papps, Ivy, 1991. "The Shadow Wage in Economies with Migrant Labour: The Case of Labour as a Traded Good," The Manchester School of Economic & Social Studies, University of Manchester, vol. 59(1), pages 45-63, March.
    • Handle: RePEc:bla:manch2:v:59:y:1991:i:1:p:45-63
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