Chapter 9, National Economic Evaluation of Engineering Projects
Section 3 Calculation of Shadow Price
Shadow Price
- The so-called shadow price refers to the price that can reflect the consumption of social labor, the degree of resource scarcity and the demand for final products when the social economy is in a certain optimal state. It can be seen that shadow price is a theoretical virtual price, which is a price that is artificially determined and more reasonable (relative to the actual exchange price) in order to achieve certain social and economic development goals.
- Generally speaking, the shadow price of project inputs is its opportunity cost . The so-called opportunity cost refers to the loss of the maximum benefit that can be obtained in other fields when a resource is used in a specific field. The shadow price of the project output is its willingness to pay. The so-called willingness to pay refers to the highest price that consumers are willing to pay to purchase a certain product.
- Shadow price is a special price for economic cost-benefit analysis and calculation.
- When conducting economic cost-benefit analysis and calculation, the main outputs and inputs of the project should in principle adopt the shadow price .
1: Calculation of the shadow price of special inputs
. The shadow price of funds
- The social discount rate, also known as the shadow interest rate , is the minimum level of return that should be achieved when examining engineering project investment from the perspective of the national economy. In fact, it is also the opportunity cost and shadow price of funds . The social discount rate is the main criterion for project economic feasibility studies and program comparisons. In the project economic evaluation , it is mainly used as the discount rate to calculate the economic net present value, and is also the benchmark value used to measure the economic internal rate of return .
The social discount rate, as the shadow price of funds, represents the minimum value-added rate that the capital occupation should achieve within a certain period of time, reflecting society's expectations for the time value of funds and the estimate of the profitability of funds.
- As an important parameter in the evaluation of the national economy, the social discount rate is one of the important economic levers used by the country to evaluate and regulate investment activities.
- The social discount rate needs to be comprehensively analyzed based on national socio-economic development goals, development strategies, development priorities, development levels, macro-control intentions, social members' cost-benefit time preferences, social investment income levels, fund supply conditions, capital opportunity costs and other factors, and is uniformly measured and released by relevant national departments.
. The shadow price of foreign exchange
The shadow exchange rate is the foreign exchange rate used in national economic evaluation that is different from the official exchange rate, that is, the shadow price of foreign exchange. The shadow exchange rate is an estimate of the value of foreign exchange from the perspective of the national economy and is the shadow price of foreign exchange. In the national economic evaluation, shadow exchange rate is used to convert between foreign exchange and RMB, and at the same time, it is used as a criterion for economic exchange or exchange saving costs. The value of the shadow exchange rate directly affects the import and export decisions of the project (or plan) ratio, and affects the decision-making of product import substitution projects and product export projects. When our country conducts national economic evaluation, the shadow exchange rate is obtained by multiplying the national foreign exchange price by the shadow exchange rate conversion coefficient , that is: shadow exchange rate = shadow exchange rate conversion coefficient × official exchange rate
. The shadow price of human resources
The shadow price of human resources is shadow salary . Shadow wages are included in operating costs adjusted to economic value. Shadow wages consist of two parts:
The first is the marginal product value of labor given up by other places due to the transfer of labor from other places to projects, that is, the reduced national income elsewhere;
The second is the increased consumption of social resources caused by the transfer of labor.
. The shadow price of land
The shadow price (cost) of land refers to other potential contributions to the national economy caused by the occupation of land by the project, which results in the land being abandoned, that is, the income from the land being abandoned is also the economic cost of the land.
my country’s land is divided into urban land and rural land. Urban land already has transaction prices formed by the market to a large extent. Land in urban areas and land in suburban areas can use market prices to determine shadow prices.
The shadow price of rural land is determined based on the opportunity cost method. The national economic cost of using rural land for investment projects consists of two parts: the opportunity cost of the land and the consumption of new resources caused by the conversion of land use.
The national economic cost of land = Opportunity cost of land + New resource consumption
2. Calculation of the shadow price of foreign trade goods
. The shadow price of funds
- The social discount rate, also known as the shadow interest rate , is the minimum level of return that should be achieved when examining engineering project investment from the perspective of the national economy. In fact, it is also the opportunity cost and shadow price of funds. The social discount rate is the main criterion for project economic feasibility studies and program comparisons. In project economic evaluation, it is mainly used as the discount rate to calculate the economic net present value, and is also the benchmark value used to measure the economic internal rate of return.
The social discount rate, as the shadow price of funds, represents the minimum value-added rate that the capital occupation should achieve within a certain period of time, reflecting society's expectations for the time value of funds and the estimate of the profitability of funds.
- As an important parameter in the evaluation of the national economy, the social discount rate is one of the important economic levers for the country to evaluate and regulate investment activities.
- The social discount rate needs to be comprehensively analyzed based on the national socio-economic development goals, development strategy, development priorities, development level, macro-control intentions, cost-benefit time preference of social members, social investment income level, capital supply status, capital opportunity cost and other factors, and is uniformly measured and released by relevant national departments.
. The shadow price of foreign exchange
The shadow exchange rate is the foreign exchange rate used in national economic evaluation that is different from the official exchange rate, that is, the shadow price of foreign exchange. The shadow exchange rate is an estimate of the value of foreign exchange from the perspective of the national economy and is the shadow price of foreign exchange. In the national economic evaluation, shadow exchange rate is used to convert between foreign exchange and RMB, and at the same time, it is used as a criterion for economic exchange or exchange saving costs. The value of the shadow exchange rate directly affects the import and export decisions of the project (or plan) ratio, and affects the decision-making on import substitution projects and product export projects. When our country conducts national economic evaluation, the shadow exchange rate is obtained by multiplying the national foreign exchange quotation by the shadow exchange rate conversion coefficient, that is: Shadow exchange rate = shadow exchange rate conversion coefficient × official exchange rate
. The shadow price of human resources
The shadow price of human resources is shadow salary . Shadow wages are included in operating costs adjusted to economic value. Shadow wages consist of two parts:
The first is the marginal product value of labor given up by other places due to the transfer of labor from other places to projects, that is, the reduced national income elsewhere;
The second is the increased consumption of social resources caused by the transfer of labor.
. The shadow price of land
The shadow price (cost) of land refers to other potential contributions to the national economy caused by the occupation of land by the project, which results in the land being abandoned, that is, the income from the land being abandoned is also the economic cost of the land.
my country’s land is divided into urban land and rural land. Urban land already has transaction prices formed by the market to a large extent. Land in urban areas and land in suburban areas can use market prices to determine shadow prices.
The shadow price of rural land is determined based on the opportunity cost method.The national economic cost of using rural land for investment projects consists of two parts: the opportunity cost of the land and the consumption of new resources caused by the conversion of land use.
The national economic cost of land = land opportunity cost + new resource consumption
2. Calculation of the shadow price of foreign trade goods
Foreign trade goods
Foreign trade goods refer to goods whose production or use will directly or indirectly affect the country's import and export.. Including: goods among the project outputs that are directly exported (increased exports), indirectly exported (substituted products of other enterprises to supply the domestic market so that other enterprises can increase exports), or substituted for imports (increased imports by increasing production); among project inputs, goods directly imported (increased imports), indirectly imported (squeezing inputs from other enterprises to increase imports), or reduced exports (squeezing out domestic products that could originally be used for export).
The shadow price of foreign trade goods is determined based on the actual possible international market price, generally based on the port price . When selecting port prices, we should pay attention to the changing trends of the international market, make well-founded predictions, and pay attention to eliminating the influence of factors such as dumping of and , temporary shortages, short-term fluctuations, etc., and also consider the quality difference.
3. Calculation of the shadow price of non-foreign trade goods
Non-foreign trade goods
Non-foreign trade goods refer to goods whose production or use does not affect the country's export or import. According to the reasons why they cannot be traded abroad, non-foreign trade goods are divided into natural non-foreign trade goods and non-natural non-foreign trade goods.
Natural non-foreign trade goods refer to goods whose use and services are naturally limited to the country, including domestic construction and commerce, domestic transportation and other domestic services. Non-natural non-foreign trade goods refer to goods that cannot be traded due to economic reasons or policy reasons, including goods that cannot be traded due to national trade policies and legal restrictions, and also include goods whose domestic production costs plus transportation and trade costs to the port are higher than the FOB price, making exports outweigh the losses and cannot be exported. At the same time, the CIF price of foreign goods is higher than the economic cost of domestic production of the same goods, so that the goods cannot be imported from abroad.
FOB price Domestic production cost CIF price
Four, the steps of national economic evaluation
The steps of national economic evaluation
National economic evaluation mainly includes the identification, measurement and comparison of national economic benefits and costs, as well as the analysis of national economic profitability, foreign exchange effect analysis, etc. . In addition, external effects that are difficult to quantify should also be analyzed qualitatively. The specific content and steps are as follows:
. Identification of national economic benefits and costs
. Determination of shadow prices
. Adjustment of basic data
. Preparation of reports
. Analysis of national economic benefits
6. Conduct uncertainty analysis
7. Make evaluation conclusions and suggestions
, National economic evaluation indicators
National economic evaluation indicators are divided into two categories:
One is the economic effect (benefit) index;
The second is the social effect (benefit) index;
Among them, the economic benefit index is the main indicator for quantitative calculation, while the social effect (benefit) index mainly explains the intangible effect .
. Economic benefit indicators
. Social benefit indicators
Social benefits are mainly intangible effects. The main evaluation indicators are as follows:
(1) Social effect evaluation indicators expressed in quantitative form. The evaluation indicators in this form mainly include labor employment effect indicators (including total employment effect, direct employment effect and indirect employment effect), income distribution effect indicators, product international competitiveness indicators and environmental protection effect indicators, etc.
(2) uses qualitative description of social effects. The evaluation indicators of this form mainly include the introduction of advanced technology, social infrastructure, ecological balance, regional development and economic development, changes in population structure and cultural quality, as well as qualitative analysis indicators in aesthetic, political, military and other aspects.
Classroom Exercises
. In actual economic life, the market prices of some products cannot truly reflect the national economy's investment and output in the project. In this case, when conducting economic analysis , () must be used.
A. Market price
B. Constant price
C. Variable price
D. Shadow price
Answer: D
Analysis: This question assesses shadow price. In order to truly reflect the costs and benefits of the project, it is necessary to adjust the market prices of certain inputs and outputs in the project economic evaluation, and use a more reasonable calculated price, that is, the shadow price. Therefore, D
is selected for this topic. The shadow price of foreign trade goods is determined based on the actual possible international market price.
is generally selected.
A. Port price
B. Variable price
C. Plan price
D. Actual price
Answer: A
Analysis: This question assesses the shadow price of foreign trade goods. The shadow price of foreign trade goods is determined based on the actual possible international market price, generally based on the port price. Therefore, choose A for this question.
. The shadow price of the project input refers to the () of the input.
A. Market price
B. Opportunity cost
C. Planned price
D. Transfer price
Answer: B
Analysis: This question assesses shadow prices. Generally speaking, the shadow price of a project input is its opportunity cost. Therefore, choose B for this question.
