Shadow prices of goods and resources in the Philippines : an assessment

Abstract

When market imperfections are present, which is often the case for the less developed countries including the Philippines, observable market prices do not usually indicate true valuations of goods and resources to society. An alternative method of valuation is thus needed in the economic evaluation of projects° This is the role of shadow prices --- prices which would reflect social costs and benefits and the use of which would lead to proper selection of projects and thus improved welfare. This paper summarizes the existing estimates of shadow prices of goods and resources in the Philippines_ These include a) implicit tariffs_ b) the shadow exchange rate, c) the shadow wage rate, and d) the social rate of discount and the shadow price of capital. The methodologies and assumptions used in the estimation are explained_ Moreover, some policy implications of the results are derived,