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On Shadow Pricing Labour and Foreign Exchange

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  • Tower, Edward
  • Pursell, Garry G

Abstract

A simple model is built to shadow-price labor in foreign exchange numeraire and foreign exchange in utility numeraire, first by assuming that ex change-rate or nominal wage adjustment is the mechanism by which fore ign exchange is allocated, then assuming that sector-specific taxes a nd/or subsidies on consumption, international trade, and/or productio n are the mechanisms used. In the process, the authors show how to us e effective rates of protection in calculating these shadow prices, p rovide a proof of the proposition of M. F. G. Scott, and resolve the meaning of a formula designed by Bela Balassa to describe the shadow prices of both foreign exchange and primary factors of production. Copyright 1987 by Royal Economic Society.

Suggested Citation

  • Tower, Edward & Pursell, Garry G, 1987. "On Shadow Pricing Labour and Foreign Exchange," Oxford Economic Papers, Oxford University Press, vol. 39(2), pages 318-332, June.
    • Handle: RePEc:oup:oxecpp:v:39:y:1987:i:2:p:318-32
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    Cited by:

    1. George Fane, 1991. "The Social Opportunity Cost of Foreign Exchange: A Partial Defence of Harberger et al," The Economic Record, The Economic Society of Australia, vol. 67(4), pages 307-316, December.
    2. Anderson, James E. & Martin, Will, 1998. "Evaluating public expenditures when governments must rely on distortionary taxation," Policy Research Working Paper Series 1981, The World Bank.
    3. John Gilbert & Reza Oladi, 2021. "Labor‐eliminating technical change in a developing economy," International Journal of Economic Theory, The International Society for Economic Theory, vol. 17(1), pages 88-100, March.

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