The Social Cost of Labor, and Project Evaluation: A General Approach
AbstractThis paper develops a general methodology for analyzing shadow wage (and other shadow prices). Our approach is to identify those reduced form relationships describing the economy which are central to the determination of the shadow wage, and use these to obtain simple formulae for the shadow wage. Among the aspects of the economy on which we focus are: (i) the difference between the domestic and international prices, (ii) the equilibrating mechanisms in the economy, (iii) the mechanisms which determine earnings of industrial and agricultural workers, (iv) the nature of migration, and (vi) the intertemporal trade-offs and the attitudes towards inequality. These aspects are modelled in a general manner, which can be specialized to a number of alternative hypotheses concerning technology, behavioral postulates, and institutional settings. Most earlier results on the shadow wages are derived as special cases of our formulae. In addition, we identify a number of new qualitative results concerning the relationship between the shadow wage and the market wage.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1229.
Date of creation: Nov 1983
Date of revision:
Publication status: published as Sah, Raaj Kumar and Joseph E. Stiglitz. "The Social Cost of Labor and Project Evaluation: A General Approach." Journal of Public Economics, Vol. 28,(1985), pp. 135-163.
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- Sah, Raaj Kumar & Stiglitz, Joseph E., 1985. "The social cost of labor and project evaluation: A general approach," Journal of Public Economics, Elsevier, vol. 28(2), pages 135-163, November.
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