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Title: |
Effects of Direct Foreign Investment in the
Presence of Sector-Specific Unemployment |
| Author: |
Gonzalez, Jorge
G. |
| Author
Affiliation: |
MI State U |
| Source: |
International Economic Journal, Summer 1988, v. 2, no. 2, pp. 15-27 |
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Publication Date: |
Summer 1988 |
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Abstract: |
This paper analyzes the effects of foreign
investment on a Harris-Todaro economy. It is shown that inflows of
foreign capital in the manufacturing sector may decrease or increase
unemployment. In the absence of another distortion foreign investment
necessarily improves the welfare of the small economy independently of
the pattern of trade. This paper identifies the conditions that
determine the direction of change of national welfare, in the presence
of a tariff and unemployment. Import substitution strategies are more
likely to improve welfare and increase employment in countries
characterized by a high ratio of urban to rural employment. |
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