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Foreign direct investment, urban unemployment and welfare


  • Shigemi Yabuuchi


The effects of foreign direct investments on welfare and unemployment are examined in the case where there is urban unemployment. Our main findings are that an increase in foreign capital investment leaves social welfare intact and reduces unemployment if foreign capital is specific to foreign firms, and it may increase social welfare and reduce unemployment if foreign capital is also used in the domestic manufacturing sector. Thus, our analysis is consistent with many empirical evidences that emerging economies employ export processing zones or duty free zones intensively as their development strategies.

Suggested Citation

  • Shigemi Yabuuchi, 1999. "Foreign direct investment, urban unemployment and welfare," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 8(4), pages 359-371.
  • Handle: RePEc:taf:jitecd:v:8:y:1999:i:4:p:359-371 DOI: 10.1080/09638199900000022

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    References listed on IDEAS

    1. O. Galor & H. M. Polemarchakis, 1987. "Intertemporal Equilibrium and the Transfer Paradox," Review of Economic Studies, Oxford University Press, vol. 54(1), pages 147-156.
    2. Chichilnisky, Graciela, 1980. "Basic goods, the effects of commodity transfers and the international economic order," Journal of Development Economics, Elsevier, vol. 7(4), pages 505-519, December.
    3. Haaparanta, Pertti, 1989. "The intertemporal effects of international transfers," Journal of International Economics, Elsevier, vol. 26(3-4), pages 371-382, May.
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    Cited by:

    1. Kristof Dascher, 2015. "Foreign Direct Investment into Open and Closed Cities," Scottish Journal of Political Economy, Scottish Economic Society, vol. 62(2), pages 191-210, May.
    2. Chella, Namapsa & Phiri, Andrew, 2017. "Long-run cointegration between foreign direct investment, direct investment and unemployment in South Africa," MPRA Paper 82371, University Library of Munich, Germany.


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