Foreign Capital, National Welfare and Unemployment in a Fair Wage Model
AbstractThe paper develops a three-sector general equilibrium model that can explain simultaneous existence of unemployment of both skilled and unskilled labour. The unemployment of unskilled labour is explicated in terms of rural-urban migration mechanism while that of skilled labour is shown using the ‘fair wage hypothesis’. The paper finds that foreign direct investment (FDI) in the primary export sector improve both national welfare and urban unemployment problem of unskilled labour while the consequences of foreign capital flows into the import-competing sector and high-skill export sector are ambiguous. The paper justifies the desirability of FDI flow in the primary export sector from the perspective of both unemployment and social welfare.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 18005.
Date of creation: 30 Aug 2009
Date of revision:
Fair wage hypothesis; skilled labour; unskilled labour; national welfare; unemployment.;
Find related papers by JEL classification:
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- F10 - International Economics - - Trade - - - General
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
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