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Shadow pricing and wage and employment issues in national economic planning (English)

The relevance of a recently refined theory of shadow pricing to poverty and employment policy formulation is discussed. There is a three stage process that underlies the proposed analytical framework for integrating growth, employment, and distributional issues in national economic planning. Initially, the technologically possible frontier between present and future consumption must be delineated. This delineation depends upon the binding structural and political constraints that influence the technological frontier. Once the feasibility frontier is defined, a second-best optimal growth path can be calculated. The constraints most often incorporated in such models are a modern sector institutional wage above the supply price or marginal product of labor in the traditional sector, and the inability of the government to control consumption out of wages. Then the extent to which the economy follows the defined path can be determined and an investment and public expenditure program can be devised. Overall, this framework is essentially a technique for policy planning. 17 references.

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Citation

LAL, D.

Shadow pricing and wage and employment issues in national economic planning (English). World Bank reprint series ; no. REP 131 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/468931467980467953/Shadow-pricing-and-wage-and-employment-issues-in-national-economic-planning