Abstract
It has long been agreed, that the economic value of unemployed labor is less than its wage rate. Shadow-pricing of such labor is common practice in economic analysis. The usual outcome of such shadow-pricing is that the economic rate of return of a project is enhanced. But this is not always the case. Using the data from a soil productivity enhancement project in Mexico, it is shown that the use of essential, labor-saving technology in a project designed to increase output and Income may reduce, rather than increase economic benefits, if the displaced labor has no alternative employment opportunities, while the opposite is the case if such alternatives exist.
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Secretaria de Agricultura y Recursos Hidraulicos (SARH), Banrural, SPP,Mejoramiento De La Agriculture De Temporal Con Los Programas De Desmonte, Despiedre Y Subsuelo En El Estado De Zacatecas, Zacatecas, Za, 1978.
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Based on a paper entitled: “Sub-Soiling-Economic Solution or Disaster for the Development of Arid Lands?” presented originally at the XVIIIth Annual Meeting of the Western Regional Science Association, San Diego, Cal., Feb. 23–25, 1979. The analysis underlying this paper was undertaken while the author was Professor of Resource Economics at the University of Michigan, Ann Arbor. None of the findings or conclusions should be attributed either to the University of Michigan or the World Bank.
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Schramm, G. Regional development and the value of migratory labor-some perverse economic/technological interactions. Ann Reg Sci 22 (Suppl 1), 8–27 (1988). https://doi.org/10.1007/BF01952840
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DOI: https://doi.org/10.1007/BF01952840