Estimation of the Economic Opportunity Cost of Labor: An Operational Guide for Mozambique

Glenn Jenkins (), Pejman Bahramain () and Mikhail Miklyaev
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Pejman Bahramain: Postdoctoral Fellow, JDINT’L Executive Programs,Department of Economics, Queen’s University Kingston, Ontario, Canada, K7L3N6
Authors registered in the RePEc Author Service: Pejman Bahramian

No 2019-04, Development Discussion Papers from JDI Executive Programs

Abstract: Using the supply price approach, the economic opportunity cost of labor (EOCL) was estimated for a number of labor market situation in Mozambique. The (EOCL) varies by skill, location, and labor market. The approach presented in this paper incorporates these factors in the estimation process. Due to the influence of diverse labour market conditions at the time of project implementation one is not able to provide a single estimate of the EOCL that can be used in the evaluation of all projects. Instead our objective is to develop an operational framework with examples that will serve as a guide for the estimation of the EOCLs across a range of circumstances typical to Mozambique. Our findings indicate that the range of the EOCL in Mozambique can vary from near equality with the project wage for unskilled workers to about 63% of the project wage for foreign-sourced skilled workers. These rates depend heavily on location and on the highly-differentiated skills of the labor employed and, most importantly, the wage paid by the project relative to the minimum wage required (the supply price) to attract sufficient workers with the required skills. Similarly, the consideration of the international mobility of workers further enriches this analysis.

Keywords: Economic Cost; Labor; Supply Price; Protected Wage; Investment Appraisal (search for similar items in EconPapers)
JEL-codes: H43 J23 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2019-04
New Economics Papers: this item is included in nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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