Foreign Capital, Unemployment, Worker's Efficiency and Fair Wage
A Two sector fair wage model has been considered. It is shown that an exogenous inflow of foreign capital has no effect on unemployment; and the Brecher-Alejandro(1977) proposition remains valid in its original form when the efficiency function is similar to that of Aell and Lundbrg (1992, 1995). However, results may be different in the following cases: (i) the efficiency depends negatively on the ratio of foreign capital to domestic capital; (ii) there is intersectoral distortion in the capital market; (iii) one of the two sectors produces an unhealthy good and worsens efficiency; and (iv) the foreign capital inflow leads to technological advancement in the economy.
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Volume (Year): 34 (1999)
Issue (Month): 1 (January)
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