A method of estimating shadow prices and its application: International competitiveness of Japanese agriculture and manufacturing industries
1992
Sugimoto, Y. (Chiba Univ., Matsudo (Japan). Faculty of Horticulture)
The role and factor of shadow prices of goods are very important for project evaluation, and especially for evaluation of environment. Indeed there are many theoretical studies on shadow prices, however, few studies on estimating shadow prices from actual data. The purpose of this paper is to derive formulae of shadow prices which can be easily estimated from the Input-Output data. We develop the linear general equilibrium model based on Bell-Devarjan-Tajika to derive the new formulae of shadow prices for primary factors, tradable goods, nontradable goods and foreign exchange. We apply these formula to Japanese Input-Output Table data to estimate shadow prices. Using these prices, we estimate Domestic Resource Cost (DRC) as the index of international competitiveness of Industries. It is another purpose of this paper to analyze the changes of comparative advantage in Japanese industries including agricultural sector from 1960 to 1980. The major results are as follows: 1) The extent of comparative disadvantage of Japanese agriculture is large. 2) The labor intensive industries have lost their competitiveness since 1960. On the other hand, capital intensive industries such as machinery, chemistry, electricity have required the competitiveness since 1980. These findings confirms the effectiveness of DRC approach. 3) According to the coefficient of variation of DRC, the efficiency of resource allocation was getting better from 1970 to 1975, but getting worse from 1975 to 1980
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