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The Social Cost of Labor, and Project Evaluation: A General Approach

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Author Info
Joseph E. Stiglitz
Raaj Kumar Sah

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Abstract

This 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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1229.

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Date of creation: Jul 1986
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Handle: RePEc:nbr:nberwo:1229

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Blitzer, Charles & Dasgupta, Partha & Stiglitz, Joseph, 1981. "Project Appraisal and Foreign Exchange Constraints," Economic Journal, Royal Economic Society, vol. 91(361), pages 58-74, March. [Downloadable!] (restricted)
  2. Marchand, Maurice & Mintz, Jack & Pestieau, Pierre, 1985. "Public production and shadow pricing in a model of disequilibrium in labour and capital markets," Journal of Economic Theory, Elsevier, vol. 36(2), pages 237-256, August. [Downloadable!] (restricted)
  3. Dixit, Avinash, 1971. "Short-run Equilibrium and Shadow Prices in the Dual Economy," Oxford Economic Papers, Oxford University Press, vol. 23(3), pages 384-400, November. [Downloadable!] (restricted)
  4. Stern, Nicholas H, 1972. "Optimum Development in a Dual Economy," Review of Economic Studies, Blackwell Publishing, vol. 39(2), pages 171-84, April. [Downloadable!] (restricted)
  5. Dixit, Avinash & Stern, Nicholas, 1974. "Determinants of Shadow Prices in Open Dual Economies," Oxford Economic Papers, Oxford University Press, vol. 26(1), pages 42-53, March. [Downloadable!] (restricted)
  6. Newbery, David M G, 1972. "Public Policy in the Dual Economy," Economic Journal, Royal Economic Society, vol. 82(326), pages 567-90, June. [Downloadable!] (restricted)
  7. Sen, Amartya K, 1972. "Control Areas and Accounting Prices: An Approach to Economic Evaluation," Economic Journal, Royal Economic Society, vol. 82(325), pages 486-501, Supplemen. [Downloadable!] (restricted)
  8. Newbery, David, 1974. "The Robustness of Equilibrium Analysis in the Dual Economy," Oxford Economic Papers, Oxford University Press, vol. 26(1), pages 32-41, March. [Downloadable!] (restricted)
  9. Roberts, Kevin W S, 1982. "Desirable Fiscal Policies under Keynesian Unemployment," Oxford Economic Papers, Oxford University Press, vol. 34(1), pages 1-22, March. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Massimo Florio, 2006. "Cost--benefit analysis and the European union cohesion fund: On the social cost of capital and labour," Regional Studies, Taylor and Francis Journals, vol. 40(2), pages 211-224, April. [Downloadable!] (restricted)
  2. Alkire, Sabina & Deneulin, SŽverine, 1998. "Individual Motivation, its Nature, Determinants and Consequences for Within Group Behavior," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1999033, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
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  3. Lawrence F. Katz & Lawrence H. Summers, 1989. "Can Inter-Industry Wage Differentials Justify Strategic Trade Policy?," NBER Working Papers 2739, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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