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Removal of protectionism, foreign investment and welfare in a model of informal sector

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  • Chaudhuri, Sarbajit
  • Mukherjee, Ujjaini

Abstract

The paper develops a three-sector general equilibrium model with two informal sectors with complete mobility of labour between these sectors and with a positive relationship between wage income and labour's efficiency to show that the results relating to foreign capital inflow and removal of protectionism may be counterintuitive to the conventional wisdom. The paper is also devoted to explain why some developing countries implement tariff reforms very slowly compared to others, even after formally choosing free trade as their development strategies, in a more general fashion than the existing tariff-jumping theory.

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Bibliographic Info

Article provided by Elsevier in its journal Japan and the World Economy.

Volume (Year): 14 (2002)
Issue (Month): 1 (January)
Pages: 101-116

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Handle: RePEc:eee:japwor:v:14:y:2002:i:1:p:101-116

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Web page: http://www.elsevier.com/locate/inca/505557

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  1. Khan, M. Ali, 1982. "Tariffs, foreign capital and immiserizing growth with urban unemployment and specific factors of production," Journal of Development Economics, Elsevier, vol. 10(2), pages 245-256, April.
  2. Beladi, H. & Marjit, S., 1992. "Foreign Capital and Protectionism," RCER Working Papers 310, University of Rochester - Center for Economic Research (RCER).
  3. Brecher, Richard A. & Diaz Alejandro, Carlos F., 1977. "Tariffs, foreign capital and immiserizing growth," Journal of International Economics, Elsevier, vol. 7(4), pages 317-322, November.
  4. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  5. Stiglitz, Joseph E, 1976. "The Efficiency Wage Hypothesis, Surplus Labour, and the Distribution of Income in L.D.C.s," Oxford Economic Papers, Oxford University Press, vol. 28(2), pages 185-207, July.
  6. Chandra, Vandana & Khan, M Ali, 1993. "Foreign Investment in the Presence of an Informal Sector," Economica, London School of Economics and Political Science, vol. 60(237), pages 79-103, February.
  7. Bliss, Christopher & Stern, Nicholas, 1978. "Productivity, wages and nutrition : Part I: the theory," Journal of Development Economics, Elsevier, vol. 5(4), pages 331-362, December.
  8. Motta, Massimo, 1992. "Multinational firms and the tariff-jumping argument : A game theoretic analysis with some unconventional conclusions," European Economic Review, Elsevier, vol. 36(8), pages 1557-1571, December.
  9. Dasgupta, Partha & Ray, Debraj, 1986. "Inequality as a Determinant of Malnutrition and Unemployment: Theory," Economic Journal, Royal Economic Society, vol. 96(384), pages 1011-34, December.
  10. Grinols, Earl L, 1991. "Unemployment and Foreign Capital: The Relative Opportunity Costs of Domestic Labour and Welfare," Economica, London School of Economics and Political Science, vol. 58(229), pages 107-21, February.
  11. Beladi, Hamid & Marjit, Sugata, 1992. "Foreign capital, unemployment and national welfare," Japan and the World Economy, Elsevier, vol. 4(4), pages 311-317, December.
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Citations

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Cited by:
  1. Chatterjee, Tonmoy & Gupta, Kausik, 2014. "Trade Policies, Health Care and Social Welfare: A General Equilibrium Analysis," MPRA Paper 57315, University Library of Munich, Germany.
  2. Kausik Gupta & Tania Basu, 2004. "Foreign Capital Inflow, Skilled-Unskilled Wage Gap, and Welfare in the Presence of the Informal Sector," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(2), pages 125-147.
  3. Chaudhuri, Sarbajit & Banerjee, Dibyendu, 2006. "Economic Liberalization and Informal Wage in a Small Open Economy: Does Capital Mobility count?," MPRA Paper 1353, University Library of Munich, Germany.
  4. Sarbajit Chaudhuri, 2005. "Foreign Capital Inflow, Non-Traded Intermediary, Urban Unemployment And Welfare In A Small Open Economy: A Theoretical Analysis," International Trade 0511008, EconWPA.
  5. Chaudhuri, Sarbajit & Mukhopadhyay, Ujjaini, 2009. "Revisiting the Informal Sector: A General Equilibrium Approach," MPRA Paper 52135, University Library of Munich, Germany.
  6. Chaudhuri, Sarbajit & Banerjee, Dibyendu, 2007. "Economic liberalization, capital mobility and informal wage in a small open economy: A theoretical analysis," Economic Modelling, Elsevier, vol. 24(6), pages 924-940, November.
  7. Sarbajit Chaudhuri, 2005. "Direct Foreign Investment In A Small Open Economy And Global Trade Liberalization In Agriculture: A Note," International Trade 0510012, EconWPA.
  8. M. Ali Khan, 2007. "The Harris-Todaro Hypothesis," Labor Economics Working Papers 22206, East Asian Bureau of Economic Research.
  9. Chaudhuri, Sarbajit, 2010. "Economic recession, demand constraint and labour markets in a developing economy," MPRA Paper 27433, University Library of Munich, Germany.
  10. Dwibedi, Jayanta & Chaudhuri, Sarbajit, 2011. "Poverty alleviation programs, FDI-led growth and child labour under agricultural dualism," MPRA Paper 29997, University Library of Munich, Germany.
  11. Khan, M. Ali Khan, 2007. "The Harris-Todaro Hypothesis," MPRA Paper 2201, University Library of Munich, Germany.
  12. Sarbajit Chaudhuri, 2005. "Tariff Structure In A Small Open Economy: A Theoretical Analysis," International Trade 0511006, EconWPA.
  13. Asongu, Simplice A, 2013. "Liberalization and financial sector competition: a critical contribution to the empirics with an African assessment," MPRA Paper 52212, University Library of Munich, Germany.
  14. Marjit, Sugata & Kar, Saibal & Acharyya, Rajat, 2007. "Agricultural prospects and informal wage in general equilibrium," Economic Modelling, Elsevier, vol. 24(3), pages 380-385, May.
  15. Chatterjee, Tonmoy & Gupta, Kausik, 2013. "Trade in Health Services and Globalization: The Role of Infinitesimal Changes of Trade Policy," MPRA Paper 57343, University Library of Munich, Germany.

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