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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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    References listed on IDEAS

    1. Edward C. Prescott, 2004. "Why do Americans work so much more than Europeans?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Jul, pages 2-13.
    2. Catherine L. Mann, 1999. "Is the U.S. Trade Deficit Sustainable?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 47.
    3. Lee Branstetter, 1996. "Are Knowledge Spillovers International or Intranational in Scope? Microeconometric Evidence from the Japan and the United States," NBER Working Papers 5800, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Khan, M. Ali Khan, 2007. "The Harris-Todaro Hypothesis," MPRA Paper 2201, University Library of Munich, Germany.
    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. Takeuchi, Nobuyuki, 2012. "Reconsidering the effect of economic development on urban unemployment under non-homothetic preferences," MPRA Paper 39378, University Library of Munich, Germany.
    4. 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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