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Revisiting the Apparent Paradox: Foreign Capital Inflow, Welfare Amelioration and ‘Jobless Growth’ with Agricultural Dualism and Non-traded Intermediate Input

Author

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  • Mukherjee, Soumyatanu

    (University of Calcutta)

Abstract

In order to answer the pertinent question why developing countries are showing penchant for foreign capital over the last two decades in spite of its detrimental effects as revealed from the conventional two-sector mobile capital version of Harris–Todaro (HT) model in the presence of protectionist policy; this paper, in terms of a three-sector HT type general equilibrium model with agricultural dualism where advanced agricultural sector produces a non-traded intermediate input using capital apart from labour and land for the agro-based industry in the urban sector, tries to show that foreign capital inflow may not only improve social welfare, but also lower the magnitude of urban unemployment of labour or may lead to the phenomenon of ‘jobless growth’.

Suggested Citation

  • Mukherjee, Soumyatanu, 2012. "Revisiting the Apparent Paradox: Foreign Capital Inflow, Welfare Amelioration and ‘Jobless Growth’ with Agricultural Dualism and Non-traded Intermediate Input," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 27, pages 123-133.
    • Handle: RePEc:ris:integr:0563
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    References listed on IDEAS

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    1. Marjit, Sugata, 1991. "Agro-based industry and rural-urban migration : A case for an urban employment subsidy," Journal of Development Economics, Elsevier, vol. 35(2), pages 393-398, April.
    2. Chaudhuri, Sarbajit, 2007. "Foreign capital, welfare and urban unemployment in the presence of agricultural dualism," Japan and the World Economy, Elsevier, vol. 19(2), pages 149-165, March.
    3. Khan, M. Ali, 1982. "Tariffs, foreign capital and immiserizing growth with urban unemployment and specific factors of production," Journal of Development Economics, Elsevier, vol. 10(2), pages 245-256, April.
    4. M. ALl KHAN, 1980. "Dynamic Stability, Wage Subsidies and the Generalized Harris-Todaro Model," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 19(1), pages 1-24.
    5. Corden, W M & Findlay, Ronald, 1975. "Urban Unemployment, Intersectoral Capital Mobility and Development Policy," Economica, London School of Economics and Political Science, vol. 42(165), pages 59-78, February.
    6. Beladi, Hamid & Marjit, Sugata, 1992. "Foreign capital, unemployment and national welfare," Japan and the World Economy, Elsevier, vol. 4(4), pages 311-317, December.
    7. Brecher, Richard A. & Diaz Alejandro, Carlos F., 1977. "Tariffs, foreign capital and immiserizing growth," Journal of International Economics, Elsevier, vol. 7(4), pages 317-322, November.
    8. Hamid Beladi & Sugata Marjit, 1992. "Foreign Capital and Protectionism," Canadian Journal of Economics, Canadian Economics Association, vol. 25(1), pages 233-238, February.
    9. Sarbajit Chaudhuri, 2003. "How and how far to liberalize a developing economy with informal sector and factor market distortions," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 12(4), pages 403-428.
    10. Chandra, Vandana & Khan, M Ali, 1993. "Foreign Investment in the Presence of an Informal Sector," Economica, London School of Economics and Political Science, vol. 60(237), pages 79-103, February.
    11. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
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    Cited by:

    1. Soumyatanu Mukherjee, 2015. "Input Trade Liberalisation and Wage-inequality with Non-traded Goods," CESifo Working Paper Series 5472, CESifo.
    2. Mukherjee, Soumyatanu & Zafar, Sameen, 2014. "Technological progress with segmented factor markets and welfare implications for the urban poor," MPRA Paper 55297, University Library of Munich, Germany.
    3. Soumyatana Mukherjee, 2013. "Liberalization and "Jobless Growth" in a Developing Economy: some Extended Results," Discussion Papers 2013-07, University of Nottingham, GEP.
    4. Mukherjee, Soumyatanu, 2016. "Technology, trade and ‘urban poor’ in a general equilibrium model with segmented domestic factor markets," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 400-416.
    5. Mukherjee, Soumyatanu, 2017. "Input trade reform and wage inequality," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 145-156.
    6. Soumyatanu Mukherjee & Shreya Banerjee, 2018. "Implications of Trade policies in segmented factor markets – A general equilibrium approach," Discussion Papers 2018-01, University of Nottingham, GEP.
    7. Soumyatanu Mukherjee, 2016. "Opening the Pandora's Box – Liberalised Input Trade and Wage Inequality with Non-traded Goods and Segmented Unskilled Labour Markets," Discussion Papers 2016-15, University of Nottingham, GEP.
    8. Mukherjee, Soumyatanu, 2013. "Sector-specific foreign direct investment, factor market distortions and non-immiserising growth," MPRA Paper 52214, University Library of Munich, Germany.
    9. Soumyatanu Mukherjee, 2016. "Tariffs, FDI with technology transfer and welfare in segmented factor markets," Working papers 190, Indian Institute of Management Kozhikode.

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    More about this item

    Keywords

    Foreign Capital; Agricultural Dualism; Non-traded Intermediate Input; Welfare; Urban Unemployment; Jobless Growth; Stolpersamuelson Theorem; General Equilibrium Model;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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