Import Liberalization, Urban Unemployment, and Capital Mobility: a Welfare Analysis
This paper examines the issue of import liberalization in the presence of urban unemployment when capital moves freely in and out of the rural area. To this end, the specific-factors version of the Harris-Todaro model is utilized. Formulas for the calculation of the shadow price of foreign exchange and capital are derived under alternative forms of import restrictions. It is shown that, as compared to an initial situation of capital immobility, international capital mobility, induced by reduction in alternative forms of import restrictions into the rural area is welfare enhancing.
Volume (Year): 11 (1997)
Issue (Month): 2 ()
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