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Shadow Wages for the EU Regions

Author

Listed:
  • Chiara Del Bo
  • Carlo Fiorio
  • Massimo Florio

Abstract

The shadow wage is the social opportunity cost of labor. After reviewing earlier theoretical and empirical literature, we define four labor market conditions: fairly socially efficient (FSE), quasi-Keynesian unemployment (QKU), urban labor dualism (ULD) and rural labor dualism (RLD). We offer, for the first time to date, an empirical estimation of the shadow wages for the EU at regional (NUTS2) level. Our estimated values are in the form of conversion factors that translate actual observed real wages into shadow wages, as required by social cost-benefit analysis of investment projects under the Structural Funds of the EU. Our results are obtained with an empirical strategy that is easy to implement with aggregate data, differently from micro-data based approaches that are costly, project specific, and often difficult to be applied because of lack of data. We find that the conversion factor for the shadow wage rate is 0.998 in 29 FSE regions (mostly capital cities); 0.943 in 135 ULD regions (mostly in rich areas); 0.8005 in 74 QKU regions, and just 0.519 in 32 RLD regions. These findings point to high variability of labor markets in the EU and have important applications for project evaluation.
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Suggested Citation

  • Chiara Del Bo & Carlo Fiorio & Massimo Florio, 2011. "Shadow Wages for the EU Regions," Fiscal Studies, Institute for Fiscal Studies, vol. 32(1), pages 109-143, March.
    • Handle: RePEc:ifs:fistud:v:32:y:2011:i::p:109-143
    DOI: j.1475-5890.2011.00129.x
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    File URL: http://hdl.handle.net/10.1111/j.1475-5890.2011.00129.x
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    Cited by:

    1. Ofelia Betancor & Gerard Llobet, 2015. "Contabilidad Financiera y Social de la Alta Velocidad en Espana," Studies on the Spanish Economy eee2015-08, FEDEA.
    2. Ram�n Barber�n & Pilar Egea & Manuel Salvador & Pilar Gracia de Renter�a, 2012. "An�lisis Coste-Beneficio de la introducci�n de dispositivos ahorradores de agua. Estudio de un caso en el sector hotelero," Documentos de Trabajo dt2012-04, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
    3. Massimo Florio & Silvia Vignetti, 2008. "Building a bridge across CBA traditions: the contribution of EU Regional Policy," Working Papers 200908, CSIL Centre for Industrial Studies.
    4. Grimaldi, Raffaele & Beria, Paolo, 2013. "Open issues in the practice of cost benefit analysis of transport projects," MPRA Paper 53766, University Library of Munich, Germany.
    5. Presiana Nenkova & Diyana Metalova, 2016. "Analysis Of Costs And Benefits Of Investments In Waste Management Systems In Bulgaria," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 625-635, July.
    6. Santamaría, Marta & Azqueta, Diego, 2015. "Promoting biofuels use in Spain: A cost-benefit analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 50(C), pages 1415-1424.
    7. Becchio, Cristina & Bottero, Marta Carla & Corgnati, Stefano Paolo & Dell’Anna, Federico, 2018. "Decision making for sustainable urban energy planning: an integrated evaluation framework of alternative solutions for a NZED (Net Zero-Energy District) in Turin," Land Use Policy, Elsevier, vol. 78(C), pages 803-817.
    8. Massimo Baldini & Giovanni Gallo & Marco Ranuzzini, 2018. "Rapporto Conclusivo dell’Indagine Valutativa su Portobello – Emporio Sociale di Modena," Center for the Analysis of Public Policies (CAPP) 0165, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    9. Morena Bruno & Michela Marchi & Nicolò Ermini & Valentina Niccolucci & Federico Maria Pulselli, 2023. "Life Cycle Assessment and Cost–Benefit Analysis as Combined Economic–Environmental Assessment Tools: Application to an Anaerobic Digestion Plant," Energies, MDPI, vol. 16(9), pages 1-19, April.
    10. Giorgio Barba Navaretti & Anthony J. Venables, 2013. "Multinationals and industrial policy," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 29(2), pages 361-382, SUMMER.
    11. Tugba Somuncu & Christopher Hannum, 2018. "The Rebound Effect of Energy Efficiency Policy in the Presence of Energy Theft," Energies, MDPI, vol. 11(12), pages 1-28, December.
    12. Harald Lang & Armin-D. Riess, 2019. "Shadow wages in cost-benefit rules for project and policy analyses: estimates for OECD countries," DEM Discussion Paper Series 19-05, Department of Economics at the University of Luxembourg.

    More about this item

    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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