engleski

Estimating the shadow prices for CHP plant project appraisal in a rural and lagging behind region

To estimate all of the potential costs and benefits of a project and then to facilitate a selection of the best alternative, cost-benefit analysis may be used. However, there are some major issues related thereto, one of the most important ones being an estimation of shadow prices. Namely, if there are market distortions, the observed market prices do not reflect the true cost to society, and consequently shadow prices should be estimated. The main purpose of this paper is to estimate shadow prices and their corresponding conversion factors to be used for the combined cycle heat and power (CHP) plant project appraisal for the period 2010-2013. Thereby, the focus is placed on calculation of shadow prices of the labour and foreign exchange rate in Osijek-Baranja County, a rural and lagging behind region in which this CHP plant will be constructed. The results indicate a higher value of the shadow exchange rate and a lower value of shadow wages compared to the official (market) ones, which are both overvaluated.

CHP plants ; cost-benefit analysis ; shadow exchange rate ; shadow wages

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