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Foreign Capital, Welfare And Urban Unemployment In The Presence Of Agricultural Dualism

Author

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  • Sarbajit Chaudhuri

    (Dept. of Economics, Calcutta University, India)

Abstract

In a two sector mobile capital Harris-Todaro model, such as Corden and Findlay (1975), an inflow of foreign capital in the presence of protectionist policy is welfare deteriorating as well as unemployment accentuating. But, the developing countries have chosen liberalized investment and trade policies as their development strategies and have been able to attract a considerable amount of foreign capital during the last two decades. A relevant question is why these countries are yearning for foreign capital given its detrimental effects as predicted by the conventional theoretical literature on trade and development. This paper makes an attempt to address the above issue in terms of a three sector Harris-Todaro model with agricultural dualism and a non- traded final commodity. In the given setup, an inflow of foreign capital is likely to improve welfare and does not necessarily worsen the problem of unemployment. The paper may also be useful to explain as to why many of the developing economies have experienced ‘jobless growth’ in the liberalized regime.

Suggested Citation

  • Sarbajit Chaudhuri, 2005. "Foreign Capital, Welfare And Urban Unemployment In The Presence Of Agricultural Dualism," International Trade 0510010, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpit:0510010
    Note: Type of Document - pdf; pages: 23
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Foreign capital; rural-urban migration; welfare; urban unemployment; general equilibrium; import tariff; jobless growth;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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