IDEAS home Printed from https://ideas.repec.org/p/unu/wpaper/wp-2017-112.html
   My bibliography  Save this paper

Shadow prices for a small open economy under uncertainty: Which expected values are valid

Author

Abstract

This paper re-examines the validity of using expected values to evaluate the social profitability of public investments under uncertainty. Departing from the usual assumption of an aggregate good, the setting is a small open economy that faces stochastic world prices for tradable goods and productivity levels in domestic production. It is shown that the so-called 'border price rule'—the vector of the shadow prices of traded goods is a scalar multiple of their world price vector—is, in general, invalid when the vector of mean world prices is used.

Suggested Citation

  • Clive Bell, 2017. "Shadow prices for a small open economy under uncertainty: Which expected values are valid," WIDER Working Paper Series wp-2017-112, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2017-112
    as

    Download full text from publisher

    File URL: https://www.wider.unu.edu/sites/default/files/wp2017-112.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Clive Bell & Shantayanan Devarajan, 1983. "Shadow Prices for Project Evaluation Under Alternative Macroeconomic Specifications," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(3), pages 457-477.
    2. Bell, Clive, 2003. "Development Policy as Public Finance," OUP Catalogue, Oxford University Press, number 9780198773672.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Clive Bell, 2017. "Project appraisal: A revival is long overdue," WIDER Working Paper Series wp-2017-111, World Institute for Development Economic Research (UNU-WIDER).
    2. Tony Addison & Ville Pikkarainen & Risto Rönkkö & Finn Tarp, 2017. "Development and poverty in sub-Saharan Africa," WIDER Working Paper Series 169, World Institute for Development Economic Research (UNU-WIDER).
    3. Tony Addison & Ville Pikkarainen & Risto Rönkkö & Finn Tarp, 2017. "Development and poverty in sub-Saharan Africa," WIDER Working Paper Series wp-2017-169, World Institute for Development Economic Research (UNU-WIDER).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Clive Bell, 2017. "Shadow prices for a small open economy under uncertainty: Which expected values are valid," WIDER Working Paper Series 112, World Institute for Development Economic Research (UNU-WIDER).
    2. Gersbach, Hans & Siemers, Lars-H. R., 2010. "Land Reforms And Economic Development," Macroeconomic Dynamics, Cambridge University Press, vol. 14(4), pages 527-547, September.
    3. Hans Gersbach & Hans Haller, 2018. "Hierarchical Trade," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 1165-1184, April.
    4. Clive Bell, 2017. "Project appraisal: A revival is long overdue," WIDER Working Paper Series 111, World Institute for Development Economic Research (UNU-WIDER).
    5. Scandizzo Pasquale Lucio & Cufari Daniele, 2023. "Beyond Cost Benefit Analysis: A SAM Model for Project-Program Evaluation," Working Papers 18, SITES.
    6. MERTENS, Jean-François & RUBINCHIK, Anna, 2006. "Intergenerational equity and the discount rate for cost-benefit analysis," LIDAM Discussion Papers CORE 2006091, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. Elhorst, J. Paul & Oosterhaven, Jan, 2008. "Integral Cost-Benefit Analysis of Maglev Rail Projects Under Market Imperfections," The Journal of Transport and Land Use, Center for Transportation Studies, University of Minnesota, vol. 1(1), pages 65-87.
    8. Parantap Basu & Tooraj Jamasb, 2019. "On Green Growth with Sustainable Capital," Working Papers 2019_06, Durham University Business School.
    9. Clive Bell, 2017. "Project appraisal: A revival is long overdue," WIDER Working Paper Series wp-2017-111, World Institute for Development Economic Research (UNU-WIDER).
    10. Andrea Maneschi, 1990. "Income Distribution and Shadow Pricing in Open Economies," The Economic Record, The Economic Society of Australia, vol. 66(1), pages 23-31, March.
    11. 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.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:unu:wpaper:wp-2017-112. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Siméon Rapin (email available below). General contact details of provider: https://edirc.repec.org/data/widerfi.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.