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Welfare Enhancing Capital Imports

Author

Listed:
  • Masao Oda

    (Ritsumeikan University and University of Shimane)

  • Koji Shimomura

    (Kobe University)

  • Ryuhei Wakasugi

    (Institute of Economic Research, Kyoto University)

Abstract

This paper provides a model to consider the conditions under which an acceptance of foreign capital is welfare enhancing in a multi-commodity multi-factor framework. Contrary to the pessimistic conventional wisdom of capital imports and welfare, we provide a justification for the acceptance of foreign capital and the diversification of industrial structure in developing countries. A sufficient condition for the acceptance of foreign capital to be welfare enhancing is that all domestic factors move into the new export sector in equal proportion to the endowments of factors.

Suggested Citation

  • Masao Oda & Koji Shimomura & Ryuhei Wakasugi, 2007. "Welfare Enhancing Capital Imports," KIER Working Papers 641, Kyoto University, Institute of Economic Research.
    • Handle: RePEc:kyo:wpaper:641
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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP641.pdf
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    More about this item

    Keywords

    foreign capital; export sector; tariff revenue; welfare;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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