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Shadow Wages for the EU Regions

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Author Info

  • Chiara Del Bo
  • Carlo Fiorio
  • Massimo Florio

Abstract

The shadow wage is the social opportunity cost of labor. After reviewing earlier theoretical and empirical literature, we define four labor market conditions: fairly socially efficient (FSE), quasi-Keynesian unemployment (QKU), urban labor dualism (ULD) and rural labor dualism (RLD). We offer, for the first time to date, an empirical estimation of the shadow wages for the EU at regional (NUTS2) level. Our estimated values are in the form of conversion factors that translate actual observed real wages into shadow wages, as required by social cost-benefit analysis of investment projects under the Structural Funds of the EU. Our results are obtained with an empirical strategy that is easy to implement with aggregate data, differently from micro-data based approaches that are costly, project specific, and often difficult to be applied because of lack of data. We find that the conversion factor for the shadow wage rate is 0.998 in 29 FSE regions (mostly capital cities); 0.943 in 135 ULD regions (mostly in rich areas); 0.8005 in 74 QKU regions, and just 0.519 in 32 RLD regions. These findings point to high variability of labor markets in the EU and have important applications for project evaluation.

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File URL: http://hdl.handle.net/10.1111/j.1475-5890.2011.00129.x
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Bibliographic Info

Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 32 (2011)
Issue (Month): 1 (03)
Pages: 109-143

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Handle: RePEc:ifs:fistud:v:32:y:2011:i::p:109-143

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Cited by:
  1. Giorgio Barba Navaretti & Anthony J. Venables, 2013. "Multinationals and Industrial Policy," Development Working Papers 352, Centro Studi Luca d\'Agliano, University of Milano, revised 24 Apr 2013.
  2. Massimo Florio & Silvia Vignetti, 2008. "Building a bridge across CBA traditions: the contribution of EU Regional Policy," Working Papers 200908, Centre for Industrial Studies (CSIL).
  3. Grimaldi, Raffaele & Beria, Paolo, 2013. "Open issues in the practice of cost benefit analysis of transport projects," MPRA Paper 53766, University Library of Munich, Germany.
  4. Ramón Barberán & Pilar Egea & Manuel Salvador & Pilar Gracia de Rentería, 2012. "Análisis Coste-Beneficio de la introducción de dispositivos ahorradores de agua. Estudio de un caso en el sector hotelero," Documentos de Trabajo dt2012-04, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.

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