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Sector specific foreign investment, labour inflow, economies of scale and welfare

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  • Anwar, Sajid

Abstract

This paper argues that the impact of foreign investment on welfare depends on the sector that attracts the investment and certain characteristics of the economy. It is shown that, as long as the intermediate good is non-traded, foreign investment in a sector that is subject to economies of scale increases welfare by increasing the size of the intermediate good sector. On the other hand, foreign investment in a sector that is subject to constant returns to scale decreases welfare by decreasing the size of the intermediate good sector. The impact of foreign investment (in either sector) on welfare depends on relative factor intensities when the intermediate good is traded.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 26 (2009)
Issue (Month): 3 (May)
Pages: 626-630

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Handle: RePEc:eee:ecmode:v:26:y:2009:i:3:p:626-630

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Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords: Foreign investment Economies of scale Welfare;

References

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Citations

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Cited by:
  1. Li Sheng, 2012. "Rethinking the impacts of foreign investors on urban development: the city of Macao," The Annals of Regional Science, Springer, vol. 49(1), pages 73-86, August.
  2. Gupta, Manash Ranjan & Dutta, Priya Brata, 2010. "Skilled-unskilled wage inequality, nontraded good and endogenous supply of skilled labour: A theoretical analysis," Economic Modelling, Elsevier, vol. 27(5), pages 923-934, September.
  3. Pi, Jiancai & Zhou, Yu & Yin, Jun, 2013. "International factor mobility, monopolistic competition, and wage inequality," Economic Modelling, Elsevier, vol. 33(C), pages 326-332.

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