Doctoral Dissertations

Date of Award


Degree Type


Degree Name

Doctor of Philosophy


Agricultural Economics

Major Professor

M.B. Badenhop

Committee Members

Charles L. Cleland, Joe Martin, Nelson Robinson, Keith Phillips


The primary objective of this research was to develop a set of economic and social accounting prices of inputs and outputs for the Venezuelan economy.

The parameters derived allowed putting the benefits and costs which might be encountered in a project in terms of the present value of uncommitted government income measured in foreign exchange. The parameters were designed to reflect the different final values of project inputs and outputs which depended upon whether the benefit: (Ij was measured in terms of market prices or in terms of efficiency prices; (2) was perceived today or in the future; (3) was saved or consumed; (4) accrued to the rich or to the poor; and (5) was received by the private or the public sector.

The estimates of the national parameters rested on the assumption that the distortions found in the several markets of the economy (foreign exchange, savings, labor, fiscal) causing divergence between market prices and marginal social cost or marginal social utilities will continue to exist in the future. Simple procedures to estimate tradable and nontradable goods conversion factor to change domestic market prices into border prices were developed. The following conversion factors were calculated: (1) the standard conversion factor (α); (2) the conversion factor for consumption goods (βc); (3) the conversion factor for capital goods (βk) (4) the conversion factors for intermediate goods (βI); and (5) the conversion factor for a nontradable, electricity.

Two different approaches were used to derive the shadow exchange rate in the country. The findings indicated an overevaluation of the official exchange rate varying between 7 and 16 percent, depending upon the external trade policies to be adopted in the future.

From the review of the different interest rates and capital yields considered most relevant in the country, it was concluded that the average private cost of capital in the economy ranged from 5.9 percent to 25.0 percent. Three different rates to discount benefits were estimated: the consumption rate of interest (CRI) of .065, which is the proper discount rate to use if consumption is the numeraire, and two accounting rates of interest, which should be used to derive the fall in the value of public income. The two accounting rates derived were the economic accounting rate of interest (the marginal productivity of public capital) and the social accounting rate of interest (SARI or ARI). The marginal productivity of capital in the public sector of .0976 was obtained by deriving the weighted average efficiency rate of return of fourteen of the most representative projects of the public investment program. The social accounting rate of interest was estimated by three different approaches and its value was found to vary between .075 and .081.

Also developed were the set of values required to introduce distributional considerations in project appraisal. The notion behind the distributional weight's estimates was to adjust the net benefits accruing to different individuals in accordance with a social welfare maximization criteria, that is, lowering the valuation of benefits accruing to higher income groups and raising the valuation of benefits to the lower income groups. Estimates of the distribution weight attached to particular levels of consumption were derived (di), Two different approaches were used to derive the weight which reflected the value of public income relative to the value of additional consumption at the average level of consumption (V). The estimated value of V which equaled 1.25 implied that a unit of public income (savings) in 1977 was worth 1.25 units of current consumption accruing to consumers at the average income level.

Finally, consideration was given to the methodology for the derivation of the economic and social wage ratio for skilled, semiskilled, and unskilled labor in Venezuela taking into account the sector which ultimately supplies labor to fill new job openings.

The parameters derived are the first attempt to develop a set of consistent values to be used in the appraisal of projects in Venezuela. They are aimed to allow the measurement of the economic and social conveniences of selecting investment projects which reflect the government's preference. The methodology simply provides a consistent rationale for integrating equity and efficiency in project evaluation.

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