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Industrial Targeting and Non-shiftable Capital in the Harris-Todaro Model


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  • Jai-Young Choi
  • Eden S. H. Yu
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    This paper shows that, in the 2 × 3 sector-specific capital Harris-Todaro model, capital growth owing to either domestic or foreign investment always enhances the welfare of the country (i.e. non-immiserizing), and this result of non-immiserizing foreign investment holds regardless of initial holdings of foreign capital; the policy of industrial targeting via capital investment is more effective vis-à-vis the (neoclassical) 2 × 2 mobile-capital Harris-Todaro model or the Heckscher-Ohlin model; in contrast to the recent generalization by Marjit and Beladi (2003 ), capital growth cannot be immiserizing in the present model, even if it destroys the "envelope theorem." Copyright © 2006 The Authors; Journal compilation © 2006 Blackwell Publishing Ltd.

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    Article provided by Wiley Blackwell in its journal Review of International Economics.

    Volume (Year): 14 (2006)
    Issue (Month): 5 (November)
    Pages: 910-921

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    Handle: RePEc:bla:reviec:v:14:y:2006:i:5:p:910-921

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    Cited by:
    1. M. Ali Khan, 2007. "The Harris-Todaro Hypothesis," PIDE-Working Papers, Pakistan Institute of Development Economics 2007:16, Pakistan Institute of Development Economics.
    2. Takeuchi, Nobuyuki, 2012. "Reconsidering the effect of economic development on urban unemployment under non-homothetic preferences," MPRA Paper 39378, University Library of Munich, Germany.


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