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Foreign capital inflow and its welfare implications in a developing country context

Author

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  • Mukherjee, Rudrarup

Abstract

In a small open developing country context, the author considers a three-sector general equilibrium framework and tries to find out the effects of foreign capital inflow on welfare of the country. Comparative-static results show that foreign capital inflow widens the skilled-unskilled wage gap under some reasonable conditions, although it causes an expansion of the foreign enclave and the agricultural sector and contraction of the domestic manufacturing sector. Taking sector specific foreign capital, the author finds that foreign direct investment is beneficial in a small open economy in the absence of tariffs.

Suggested Citation

  • Mukherjee, Rudrarup, 2017. "Foreign capital inflow and its welfare implications in a developing country context," Economics Discussion Papers 2017-1, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwedp:20171
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    More about this item

    Keywords

    foreign capital; small open economy; welfare; tariff; economic development;

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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