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Foreign direct investment, urban unemployment and welfare

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  • Shigemi Yabuuchi

Abstract

The effects of foreign direct investments on welfare and unemployment are examined in the case where there is urban unemployment. Our main findings are that an increase in foreign capital investment leaves social welfare intact and reduces unemployment if foreign capital is specific to foreign firms, and it may increase social welfare and reduce unemployment if foreign capital is also used in the domestic manufacturing sector. Thus, our analysis is consistent with many empirical evidences that emerging economies employ export processing zones or duty free zones intensively as their development strategies.

Suggested Citation

  • Shigemi Yabuuchi, 1999. "Foreign direct investment, urban unemployment and welfare," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 8(4), pages 359-371.
    • Handle: RePEc:taf:jitecd:v:8:y:1999:i:4:p:359-371
    DOI: 10.1080/09638199900000022
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    References listed on IDEAS

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    1. Miyagiwa, Kaz F., 1986. "A reconsideration of the welfare economics of a free-trade zone," Journal of International Economics, Elsevier, vol. 21(3-4), pages 337-350, November.
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    Cited by:

    1. Chella, Namapsa & Phiri, Andrew, 2017. "Long-run cointegration between foreign direct investment, direct investment and unemployment in South Africa," MPRA Paper 82371, University Library of Munich, Germany.
    2. Kristof Dascher, 2015. "Foreign Direct Investment into Open and Closed Cities," Scottish Journal of Political Economy, Scottish Economic Society, vol. 62(2), pages 191-210, May.
    3. Shoaib Imtiaz & Arshad Ali & Zeeshan Khan & Mohib Ullah & Muhammad Khan & Julija Jacquemod, 2020. "Determinants of Youth Unemployment in Pakistan," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 171-177.
    4. Narula, Rajneesh & Van der Straaten, Khadija, 2019. "A comment on the multifaceted relationship between multinational enterprises and within-country inequality," MERIT Working Papers 2019-035, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

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