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Import Liberalization, Urban Unemployment, and Capital Mobility: a Welfare Analysis

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  • Anil Lal
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    Abstract

    This paper examines the issue of import liberalization in the presence of urban unemployment when capital moves freely in and out of the rural area. To this end, the specific-factors version of the Harris-Todaro model is utilized. Formulas for the calculation of the shadow price of foreign exchange and capital are derived under alternative forms of import restrictions. It is shown that, as compared to an initial situation of capital immobility, international capital mobility, induced by reduction in alternative forms of import restrictions into the rural area is welfare enhancing.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal International Economic Journal.

    Volume (Year): 11 (1997)
    Issue (Month): 2 ()
    Pages: 21-37

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    Handle: RePEc:taf:intecj:v:11:y:1997:i:2:p:21-37

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    1. Andrea Maneschi, 1985. "The Shadow Pricing of Factors in a Multicommodity Specific-Factors Model," Canadian Journal of Economics, Canadian Economics Association, vol. 18(4), pages 843-53, November.
    2. Bhagwati, Jagdish N. & Brecher, Richard A., 1980. "National welfare in an open economy in the presence of foreign-owned factors of production," Journal of International Economics, Elsevier, vol. 10(1), pages 103-115, February.
    3. Batra, Raveendra N & Naqvi, Nadeem, 1987. "Urban Unemployment and the Gains from Trade," Economica, London School of Economics and Political Science, vol. 54(215), pages 381-95, August.
    4. Neary, J Peter, 1985. "International Factor Mobility, Minimum Wage Rates, and Factor-Price Equalization: A Synthesis," The Quarterly Journal of Economics, MIT Press, vol. 100(3), pages 551-70, August.
    5. Miyagiwa, Kaz, 1993. "The locational choice for free-trade zones : Rural versus urban options," Journal of Development Economics, Elsevier, vol. 40(1), pages 187-203, February.
    6. Naqvi, Nadeem & Wiener, Klaus, 1991. "External increasing returns and the shadow price of foreign exchange," Journal of International Economics, Elsevier, vol. 30(1-2), pages 177-184, February.
    7. Markusen, James R. & Melvin, James R., 1979. "Tariffs, capital mobility, and foreign ownership," Journal of International Economics, Elsevier, vol. 9(3), pages 395-409, August.
    8. Anderson, James E & Neary, J Peter, 1992. "Trade Reform with Quotas, Partial Rent Retention, and Tariffs," Econometrica, Econometric Society, vol. 60(1), pages 57-76, January.
    9. Markusen, James R., 1983. "Factor movements and commodity trade as complements," Journal of International Economics, Elsevier, vol. 14(3-4), pages 341-356, May.
    10. Chao, Chi-Chur & Yu, Eden S. H., 1995. "The shadow price of foreign exchange in a dual economy," Journal of Development Economics, Elsevier, vol. 46(1), pages 195-202, February.
    11. G. D. A. MacDougall, 1960. "THE BENEFITS and COSTS OF PRIVATE INVESTMENT FROM ABROAD: A THEORETICAL APPROACH," The Economic Record, The Economic Society of Australia, vol. 36(73), pages 13-35, 03.
    12. 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.
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