The Stationarity of Shadow Prices of Factors in Project Evaluation, with and without Distortions

Until recently, the literature on cost-benefit analysis for projects has been largely within the domain of research on public monopoly, literature currently reviewed by Jacques Lesourne, (ch. 3), and the work of public finance theorists as typified in the celebrated practical work of Ian Little and James Mirrlees in their Manual, and in the recent theoretical contribution of Peter Diamond and Mirrlees. International trade theorists have, however, turned now to the analysis of these problems, starting with the early work of Vijay Joshi and Deepak Lai, then that of W. M. Corden, and most recently culminating in the contributions of Ronald Findlay and Stanislaw Wellisz, and T. N. Srinivasan and Bhagwati. The work of Findlay-Wellisz and Srinivasan-Bhagwati (F-W-S-B) explicitly deploys the tools, insights and ideas of general equilibrium international trade theory. In particular, their analyses have been addressed to the question of deriving the shadow prices for primary factors for the purpose of project evaluation in the presence of distortions: Findlay-Wellisz (F-W) considering produetmarket and trade distortions and Srinivasan-Bhagwati (S-B) also extending their analysis to a number of factor-market distortions