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Unemployment, Investment and Sectoral Reallocation

Author

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  • Chadha, Bankim
  • Coricelli, Fabrizio

Abstract

This paper presents a model of development of an economy comprised of a rural-agricultural sector and an urban-industrial sector. The interaction of investment with unemployment creates a channel for potentially divergent long-run outcomes. If the urban-industrial capital stock falls short of a threshold level, the urban-industrial sector will not develop. If the capital stock is high enough, there is a unique path by which it will develop. Between these two extremes is a region of indeterminacy where expectations can play a pivotal role in determining the long-run outcome.

Suggested Citation

  • Chadha, Bankim & Coricelli, Fabrizio, 1995. "Unemployment, Investment and Sectoral Reallocation," CEPR Discussion Papers 1110, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1110
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    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1110
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    Citations

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    Cited by:

    1. Nauro F. Campos & Abrizio Coricelli, 2002. "Growth in Transition: What We Know, What We Don't, and What We Should," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 793-836, September.
    2. Randolph Luca Bruno, 2003. "Speed of Transition, Unemployment Dynamics and Nonemployment Policies: Evidence from the Visegrad Countries," LEM Papers Series 2003/23, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.

    More about this item

    Keywords

    Development; Investment; Restructuring; Unemployment;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • P5 - Economic Systems - - Comparative Economic Systems

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