Industrial Targeting and Non-shiftable Capital in the Harris-Todaro Model
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.
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Volume (Year): 14 (2006)
Issue (Month): 5 (November)
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