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Estimation of the Economic Opportunity Cost of Labor: An Operational Guide for Mozambique

Author

Listed:
  • Glenn P. Jenkins

    (Department of Economics, Queen's University, Kingston, Canada and Eastern Mediterranean University, North Cyprus)

  • Pejman Bahramain

    (Postdoctoral Fellow, JDINT’L Executive Programs,Department of Economics, Queen’s University Kingston, Ontario, Canada, K7L3N6)

  • Mikhail Miklyaev

    (JDINT’L Executive Programs,Department of Economics, Queen’s University Kingston, Ontario, Canada, K7L3N6, and Senior Associate/ Economist Cambridge Resources International Inc.)

Abstract

Using the supply price approach, the economic opportunity cost of labor (EOCL) was estimated for a number of labor market situation in Mozambique. The (EOCL) varies by skill, location, and labor market. The approach presented in this paper incorporates these factors in the estimation process. Due to the influence of diverse labour market conditions at the time of project implementation one is not able to provide a single estimate of the EOCL that can be used in the evaluation of all projects. Instead our objective is to develop an operational framework with examples that will serve as a guide for the estimation of the EOCLs across a range of circumstances typical to Mozambique. Our findings indicate that the range of the EOCL in Mozambique can vary from near equality with the project wage for unskilled workers to about 63% of the project wage for foreign-sourced skilled workers. These rates depend heavily on location and on the highly-differentiated skills of the labor employed and, most importantly, the wage paid by the project relative to the minimum wage required (the supply price) to attract sufficient workers with the required skills. Similarly, the consideration of the international mobility of workers further enriches this analysis.

Suggested Citation

  • Glenn P. Jenkins & Pejman Bahramain & Mikhail Miklyaev, 2019. "Estimation of the Economic Opportunity Cost of Labor: An Operational Guide for Mozambique," Development Discussion Papers 2019-04, JDI Executive Programs.
    • Handle: RePEc:qed:dpaper:4515
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    References listed on IDEAS

    as
    1. Hasan Ali Biçak & Glenn P. Jenkins & Chun-Yan Kuo & M Benjamin Mphahlele, 2004. "An Operational Guide to The Estimation Of The Economic Opportunity Cost Of Labour In South Africa," Development Discussion Papers 2004-08, JDI Executive Programs.
    2. Hasan Ali Bicak & Glenn P Jenkins & Chun‐Yan Kuo & M Benjamin Mphahlele, 2004. "An Operational Guide To The Estimation Of The Economic Opportunity Cost Of Labour In South Africa1," South African Journal of Economics, Economic Society of South Africa, vol. 72(5), pages 1057-1068, December.
    3. Michaud, Pierre-Carl & Vencatachellum, Desire, 2003. "Human Capital Externalities in South Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 51(3), pages 603-628, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Economic Cost; Labor; Supply Price; Protected Wage; Investment Appraisal;
    All these keywords.

    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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