SHADOW PRICES FOR PUBLIC PRODUCTION IN AN OPEN-ECONOMY WITH DISEQUILIBRIUM

This paper derives shadow prices for public production, employment and imports in a one-period, one-individual, small open economy where there is both unemployment and excess supply of some tradeable goods and where there exists a ceiling on the foreign trade balance. The model used is made purposely simple so as to yield shadow prices which can be interpreted and contrasted with intuitive understanding and the current literature on the subject. © 1990.