Foreign capital, non-traded goods and welfare in a developing economy in the presence of externalities
AbstractA three-sector, three-factor general equilibrium model is developed for a small open developing economy where an inflow of foreign capital generates externalities in the presence of a non-traded final commodity. There are two types of capital and the efficiency of labor depends positively on the consumption of the non-traded commodity. Effects of inflows of foreign capital on social welfare and human capital formation are examined. The analysis finds that while capital that is used in all the sectors may improve welfare, capital used specifically in the non-traded sector is likely to affect social welfare adversely. These results, which hold for a wide range of parameter values, can at least question the desirability of allowing entry of foreign capital in the non-traded final good sector that emanates externalities.
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Bibliographic InfoArticle provided by Elsevier in its journal International Review of Economics & Finance.
Volume (Year): 31 (2014)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/inca/620165
Foreign capital; Externality; Non-traded good; Social welfare; General equilibrium;
Other versions of this item:
- Chaudhuri, Sarbajit, 2013. "Foreign capital, Non-Traded Goods and Welfare in a Developing Economy in the presence of Externalities," MPRA Paper 52140, University Library of Munich, Germany.
- F18 - International Economics - - Trade - - - Trade and Environment
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
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