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Factor Growth, Urban Unemployment and Welfare Under Variable Returns to Scale

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  • Jai-Young Choi

Abstract

This paper analyzes the welfare implications of factor growth (i.e., labor growth and capital accumulation), in the mobile-capital Harris-Todaro (H-T) model by allowing the presence of variable returns to scale (VRS). It is shown that in contrast to the constant returns to scale (CRS) case, factor growth under VRS may lower the welfare of a small country and can affect the urban unemployed-employed ratio and the factor prices. Further, under VRS, the Rybczynski-type of factor endowment-output response requires much more stringent conditions (vis-a vis the CRS case). [F12, O41]

Suggested Citation

  • Jai-Young Choi, 1999. "Factor Growth, Urban Unemployment and Welfare Under Variable Returns to Scale," International Economic Journal, Taylor & Francis Journals, vol. 13(4), pages 17-34.
  • Handle: RePEc:taf:intecj:v:13:y:1999:i:4:p:17-34
    DOI: 10.1080/10168739900000042
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    References listed on IDEAS

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    1. Batra, Raveendra N & Naqvi, Nadeem, 1987. "Urban Unemployment and the Gains from Trade," Economica, London School of Economics and Political Science, vol. 54(215), pages 381-395, August.
    2. John S. Chipman, 2009. "The Theory of International Trade," Books, Edward Elgar Publishing, number 3017.
    3. Neary, J Peter, 1981. "On the Harris-Todaro Model with Intersectoral Capital Mobility," Economica, London School of Economics and Political Science, vol. 48(191), pages 219-234, August.
    4. Horst Herberg & Murray C. Kemp, 1969. "Some Implications of Variable Returns to Scale," Canadian Journal of Economics, Canadian Economics Association, vol. 2(3), pages 403-415, August.
    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. Jagdish N. Bhagwati, 1968. "Distortions and Immiserizing Growth: a Generalization," Review of Economic Studies, Oxford University Press, vol. 35(4), pages 481-485.
    7. Beladi, Hamid & Naqvi, Nadeem, 1988. "Urban unemployment and non-immiserizing growth," Journal of Development Economics, Elsevier, vol. 28(3), pages 365-376, May.
    8. Mayer, Wolfgang, 1974. "Variable Returns to Scale in General Equilibrium Theory: A Comment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(1), pages 225-235, February.
    9. Goldstein, Gerald S & Moses, Leon N, 1973. "A Survey of Urban Economics," Journal of Economic Literature, American Economic Association, vol. 11(2), pages 471-515, June.
    10. Das, Satya P., 1982. "Sector-specific minimum wages, economic growth, and some policy implications," Journal of Development Economics, Elsevier, vol. 10(1), pages 127-131, February.
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    Cited by:

    1. Andreas Pfingsten & Reiner Wolff, 2009. "Factor Supply Changes in Small Open Economies: Rybczynski Derivatives under Increasing Marginal Costs," Finnish Economic Papers, Finnish Economic Association, vol. 22(1), pages 9-20, Spring.
    2. Khan, M. Ali Khan, 2007. "The Harris-Todaro Hypothesis," MPRA Paper 2201, University Library of Munich, Germany.
    3. Titas Kumar Bandopadhyay, 2007. "Trade Reform, Capital Mobility, and Efficiency Wage in a Harris-Todaro Economy," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 46(2), pages 163-174.
    4. Vassilis T. Rapanos, 2004. "Minimum Wage And Income Distribution In Developing Countries," International Trade 0404005, University Library of Munich, Germany.

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