Foreign Capital Inflow, Non-Traded Intermediary, Urban Unemployment And Welfare In A Small Open Economy: A Theoretical Analysis
The paper attempts to analyze the implications of foreign capital inflow in a small open economy with a non-traded intermediary on the welfare and urban unemployment in a three- sector Harris-Todaro (1970) framework. The standard immiserizing result of a foreign capital inflow has been found to be valid when the non-traded intermediary is solely used in the protected import-competing sector. However, if the export sector too uses the intermediary the economy may experience an improvement in its welfare and a reduction in the urban unemployment level.
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