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Foreign Capital, Urban Unemployment, and Economic Growth
Author(s) -
Fung Michael Kayiu,
Zeng Jinli,
Zhu Lijing
Publication year - 1999
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00190
Subject(s) - economics , unemployment , foreign direct investment , welfare , capital (architecture) , capital accumulation , labour economics , factors of production , production (economics) , investment (military) , endogenous growth theory , foreign capital , capital deepening , capital formation , human capital , macroeconomics , financial capital , market economy , archaeology , politics , political science , law , history
A three‐sector endogenous growth model, is used to study the effects of foreign direct investment (FDI) on the dynamics of urban unemployment, labour income, and capital income as well as national welfare in a Harris–Todaro economy. It is shown that more FDI can affect the economy’s dynamics and national welfare positively or negatively. The paper derives conditions as to how the growth rate and welfare effects of FDI relate to the intersectoral mobility of capital, the destination of FDI, the elasticities of substitution, and the factor intensities of the final good production.