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Industrial Targeting and Non-shiftable Capital in the Harris-Todaro Model


  • Jai-Young Choi
  • Eden S. H. Yu


This paper shows that, in the 2 × 3 sector-specific capital Harris-Todaro model, capital growth owing to either domestic or foreign investment always enhances the welfare of the country (i.e. non-immiserizing), and this result of non-immiserizing foreign investment holds regardless of initial holdings of foreign capital; the policy of industrial targeting via capital investment is more effective vis-à-vis the (neoclassical) 2 × 2 mobile-capital Harris-Todaro model or the Heckscher-Ohlin model; in contrast to the recent generalization by Marjit and Beladi (2003 ), capital growth cannot be immiserizing in the present model, even if it destroys the "envelope theorem." Copyright © 2006 The Authors; Journal compilation © 2006 Blackwell Publishing Ltd.

Suggested Citation

  • Jai-Young Choi & Eden S. H. Yu, 2006. "Industrial Targeting and Non-shiftable Capital in the Harris-Todaro Model," Review of International Economics, Wiley Blackwell, vol. 14(5), pages 910-921, November.
  • Handle: RePEc:bla:reviec:v:14:y:2006:i:5:p:910-921

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    Cited by:

    1. Eden S. H. Yu & Jai-Young Choi, 2013. "Factor Growth and Foreign Investment under Product Market Imperfection in the Harris–Todaro Economy," Pacific Economic Review, Wiley Blackwell, vol. 18(5), pages 584-602, December.
    2. Jai-Young Choi & Eden S. H. Yu, 2010. "Imperfect Capital Mobility: A General Approach to the Two-Sector Harris Todaro Model," Review of International Economics, Wiley Blackwell, vol. 18(1), pages 81-94, February.
    3. Khan, M. Ali Khan, 2007. "The Harris-Todaro Hypothesis," MPRA Paper 2201, University Library of Munich, Germany.
    4. Takeuchi, Nobuyuki, 2012. "Reconsidering the effect of economic development on urban unemployment under non-homothetic preferences," MPRA Paper 39378, University Library of Munich, Germany.
    5. Lee, Seung-Hyun & Peng, Mike W. & Song, Sangcheol, 2013. "Governments, entrepreneurs, and positive externalities: A real options perspective," European Management Journal, Elsevier, vol. 31(4), pages 333-347.

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