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Comments on the implications of household production function for allocation of time. Role of commodity shadow prices; Identification of structural parameters; Proper estimation of structure.

This paper extends the case for shadow pricing traded commodities at their relative international prices in benefit-cost analysis. This result is shown to hold (a) when there are nontraded commodities whose (possibly distorted) prices are indirectly affected by public production of traded commodities, and (b) when there is a government budgetary constraint. Contrary to arguments found in the literature, neither of these cases in itself provides an argument for shadow pricing traded commodities at values other than their relative international prices. [ABSTRACT FROM AUTHOR]

The problem of how to determine the appropriate shadow prices of primary inputs for the evaluation of new projects in an open economy subject to distortions is discussed. These shadow prices are compared with the corresponding free-trade and actual market prices. It is shown that if the distortion is an output subsidy or tax on existing production, the optimal intervention for new projects is subsidies and taxes on primary factors equal to the difference between the shadow prices and the market prices and not an output subsidy or single shadow exchange rate to provide offsetting protection for the new project. It is also shown that projects viable under free trade may reduce welfare if they are introduced into a distorted economy, while projects that would increase welfare in these circumstances might not be viable under free trade. [ABSTRACT FROM AUTHOR]

It is sufficient to recognize than an increase in the quantity of children raises the cost or shadow price of the quality of children, and vice versa. This was used to explain, among other things, why the observed income elasticity of demand for quality of children is high at the same time that the observed quantity elasticity is low and often even negative. This paper brings together and integrates social interactions and the special relation between quantity and quality. We are able to show that the observed quality income elasticity would be relatively high and the quantity elasticity relatively low and sometimes negative, even if the true underlying income elasticities for quantity and quality were equal and of average value. [ABSTRACT FROM AUTHOR]

Analyzes the benefit-cost shadow pricing rule in open economies. Definition of world price in economics; Details on the Dasgupta-Stiglitz economy with restrictions on taxes and tariffs; Evaluation on the welfare loss of changing tax and tariff.

The key feature in our analysis is that the shadow price of children with respect to their number (i.e., the cost of an additional child, holding their quality constant) is greater the higher their quality is. Similarly, the shadow price of children with respect to their quality (i.e., the cost of a unit increase in quality, holding number constant) is greater, the greater the number of children. Furthermore, with appropriate change of language, the same may be said of the other commodities consumed by the family. However, to simplify the analysis in this paper, we make the quantity-quality distinction only for children. [ABSTRACT FROM AUTHOR]

There is little direct evidence on the price families place on the housewife's time. Admittedly, one may find some indirect evidence in studies of the labor-force participation of married women (e.g., Mincer 1962b; Cain 1966); but most of these studies, though recognizing the importance of children to the participation decision, did not investigate the effect of children in sufficient detail to allow any inference on the effect of children on the housewife's value of time. Some more recent studies (Smith 1972b and, in particular, Leibowitz 1972b) contributed significantly to the discarding of the notion that children can be treated as a homogeneous commodity, but these studies still did not provide direct evidence on the price of the women's inputs in the production of child services. Likewise, an attempt to measure directly the change, explained by presence of children, in time inputs involved in housework (Hill and Stafford 1972; Leibowitz 1972b) is only circumstantial evidence, serving as a complement rather than a substitute to a direct evaluation of the housewife's value of time.
I have tried in the past to estimate the price of time of nonworking women (Gronau 1971, in press). These estimates were based on aggregate data, a method that proved expensive both in computation and in terms of loss of information. Thus, I was able to examine only the effect of income and young children on the housewife's shadow price of time, leaving out variables such as the woman's age, education, and number and age composition of children. The inclusion of these variables in the analysis called for a method of estimation utilizing desegregate data. The description of this method and the new estimates of the factor effecting the shadow price of time occupy most of this paper.
Economic theory is of little help in predicting the direction and magnitude of the effects of most of the variables discussed above. The evaluation and interpretation of our results m... [ABSTRACT FROM AUTHOR]

The Pigouvian corrective tax policy in cases of technological externalities has become a common, if not traditional, policy recommendation of the applied welfare economist. Of considerable importance, then, to the general applicability and usefulness of Pigouvian corrective tax policy, is a characterization of the set of cost functions for which this policy is feasible. The paper specifies this set and show that it contains a very general class of cost functions. Furthermore, it demonstrates that this set is far larger than had been thought and, hence, that policy makers may make use of corrective tax-subsidy schemes in a much larger number of situations. The corrective tax-subsidy policy prescription is usually derived from a two-firm competitive model and then generalized. Crucial to the effective implementation of the Pigouvian policy prescription is the actual ability of the policy maker to calculate, within reasonable limits of accuracy, the statutory unit tax-subsidy levels that would lead to an elimination of the divergence between private and social- welfare-maximizing output levels. The ability to make this calculation with precision is directly related to specific knowledge of the relevant firm cost functions.

This paper examines some questions relating to the use of the domestic resource cost (DRC) and the effective rate of protection (ERP) measures for project selection and for evaluating the cost of protection. It is shown that, while DRC and ERP give the same results under optimal policies, the choice between them becomes relevant in a nonoptimal situation. Morover, if nonoptimal policies can be expected to persist during the life of the project, one needs to utilize shadow prices reflecting these policies in preference to first-best shadow prices. The paper finally considers the applicability of ERP and DRC under alternative assumptions. [ABSTRACT FROM AUTHOR]