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Sector specific foreign investment, labour inflow, economies of scale and welfare

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  • Anwar, Sajid

Abstract

This paper argues that the impact of foreign investment on welfare depends on the sector that attracts the investment and certain characteristics of the economy. It is shown that, as long as the intermediate good is non-traded, foreign investment in a sector that is subject to economies of scale increases welfare by increasing the size of the intermediate good sector. On the other hand, foreign investment in a sector that is subject to constant returns to scale decreases welfare by decreasing the size of the intermediate good sector. The impact of foreign investment (in either sector) on welfare depends on relative factor intensities when the intermediate good is traded.

Suggested Citation

  • Anwar, Sajid, 2009. "Sector specific foreign investment, labour inflow, economies of scale and welfare," Economic Modelling, Elsevier, vol. 26(3), pages 626-630, May.
  • Handle: RePEc:eee:ecmode:v:26:y:2009:i:3:p:626-630
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    References listed on IDEAS

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    Cited by:

    1. Li Sheng, 2012. "Rethinking the impacts of foreign investors on urban development: the city of Macao," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 49(1), pages 73-86, August.
    2. Pi, Jiancai & Zhou, Yu & Yin, Jun, 2013. "International factor mobility, monopolistic competition, and wage inequality," Economic Modelling, Elsevier, vol. 33(C), pages 326-332.
    3. Gupta, Manash Ranjan & Dutta, Priya Brata, 2010. "Skilled-unskilled wage inequality, nontraded good and endogenous supply of skilled labour: A theoretical analysis," Economic Modelling, Elsevier, vol. 27(5), pages 923-934, September.

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