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Foreign capital, Non-Traded Goods and Welfare in a Developing Economy in the presence of Externalities

Listed author(s):
  • Chaudhuri, Sarbajit

A three-sector, three-factor general equilibrium model is developed for a small open developing economy where an inflow of foreign capital generates externalities in the presence of a non-traded final commodity. There are two types of capital and the efficiency of labour depends positively on the consumption of the non-traded commodity. Effects of inflows of foreign capital on social welfare and human capital formation are examined. The analysis finds that while capital that is used in all the sectors may improve welfare; capital used specifically in the non-traded sector is likely to affect social welfare adversely. These results can at least question the desirability of allowing entry of foreign capital in the non-traded final good sector that emanates externalities.

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File URL: https://mpra.ub.uni-muenchen.de/52140/1/MPRA_paper_52140.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 52140.

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Date of creation: 11 Dec 2013
Handle: RePEc:pra:mprapa:52140
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  2. Mukherjee, Arijit & Tsai, Yingyi, 2013. "Multi-sourcing as an entry deterrence strategy," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 108-112.
  3. J. Peter Neary, 2001. "Foreign Direct Investment and the Single Market," Development Working Papers 160, Centro Studi Luca d'Agliano, University of Milano.
  4. Glass, Amy Jocelyn & Saggi, Kamal, 1999. "Multinational firms and technology transfer," Policy Research Working Paper Series 2067, The World Bank.
  5. 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.
  6. Beladi, H. & Marjit, S., 1992. "Foreign Capital and Protectionism," RCER Working Papers 310, University of Rochester - Center for Economic Research (RCER).
  7. 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.
  8. Dibyendu Maiti & Arijit Mukherjee, "undated". "Governance, Foreign Direct Investment and Domestic Welfare," Discussion Papers 10/27, University of Nottingham, GEP.
  9. Anuj J. Mathew & Arijit Mukherjee, 2009. "Intellectual property rights, southern innovation and foreign direct investment," Faculty Working Papers 15/09, School of Economics and Business Administration, University of Navarra.
  10. 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.
  11. Marjit, Sugata & Beladi, Hamid, 1996. "Protection and the gainful effects of foreign capital," Economics Letters, Elsevier, vol. 53(3), pages 311-316, December.
  12. Mattoo, Aaditya & Olarreaga, Marcelo & Saggi, Kamal, 2004. "Mode of foreign entry, technology transfer, and FDI policy," Journal of Development Economics, Elsevier, vol. 75(1), pages 95-111, October.
  13. Sarbajit Chaudhuri, 2005. "Foreign Capital Inflow, Non-Traded Intermediary, Urban Unemployment And Welfare In A Small Open Economy: A Theoretical Analysis," International Trade 0511008, EconWPA.
  14. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
  15. Grinols, Earl L, 1991. "Unemployment and Foreign Capital: The Relative Opportunity Costs of Domestic Labour and Welfare," Economica, London School of Economics and Political Science, vol. 58(229), pages 107-121, February.
  16. Beladi, Hamid & Marjit, Sugata, 1992. "Foreign capital, unemployment and national welfare," Japan and the World Economy, Elsevier, vol. 4(4), pages 311-317, December.
  17. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
  18. Norbäck, Pehr-Johan & Persson, Lars, 2002. "Investment Liberalization - Who Benefits from Cross Border Mergers," CEPR Discussion Papers 3166, C.E.P.R. Discussion Papers.
  19. Sarbajit Chaudhuri, 2001. "Foreign Capital Inflow, Technology Transfer, and National Income," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(1), pages 49-56.
  20. Blalock, Garrick & Gertler, Paul J., 2008. "Welfare gains from Foreign Direct Investment through technology transfer to local suppliers," Journal of International Economics, Elsevier, vol. 74(2), pages 402-421, March.
  21. Sarbajit Chaudhuri & Shigemi Yabuuchi & Ujjaini Mukhopadhyay, 2006. "Inflow Of Foreign Capital And Trade Liberalization In A Model With An Informal Sector And Urban Unemployment," Pacific Economic Review, Wiley Blackwell, vol. 11(1), pages 87-103, 02.
  22. 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.
  23. 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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