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- Title
SHADOW PRICES FOR PROJECT EVALUATION UNDER ALTERNATIVE MACROECONOMIC SPECIFICATIONS.
- Authors
Bell, Clive; Devarajan, Shantayanan
- Abstract
This paper takes the view that a project is a disturbance to an economy in equilibrium, and examines the shadow prices for project evaluation under alternative assumptions about how equilibrium is restored. When the government reacts by altering its foreign exchange reserves—a nondistortionary adjustment mechanism—the shadow prices coincide with those advocated in the manuals on social cost-benefit analysis. However, if the government adjusts its domestic expenditures or tariff rates, the shadow prices will differ from those of the manuals, except insofar as the relative shadow prices of tradeables remain their relative border prices.
- Subjects
SHADOW prices; COST effectiveness; PROJECT evaluation; ECONOMIC development projects; PROJECT management; FOREIGN exchange
- Publication
Quarterly Journal of Economics, 1983, Vol 98, Issue 3, p457
- ISSN
0033-5533
- Publication type
Article
- DOI
10.2307/1886021