Domestic labor, foreign capital and national welfare
The competitive allocation of labor across different sectors of an economy may not be socially optimal when one sector uses foreign capital. We argue that a suitably designed government intervention is required to restrict the sectors to their optimal size and maximize national welfare. Such a policy internalizes the possibility of repatriation and reinvestment. We demonstrate the optimality of a minimum wage regulation.
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"Labour-Market Aspects of Enclave-Led Growth,"
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