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INFLOW OF FOREIGN CAPITAL AND TRADE LIBERALIZATION IN A MODEL WITH AN INFORMAL SECTOR AND URBAN UNEMPLOYMENT
Author(s) -
Chaudhuri Sarbajit,
Yabuuchi Shigemi,
Mukhopadhyay Ujjaini
Publication year - 2006
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/j.1468-0106.2006.00301.x
Subject(s) - economics , unemployment , general equilibrium theory , informal sector , welfare , full employment , open economy , wage , small open economy , labour economics , investment (military) , capital (architecture) , free trade , capital flows , macroeconomics , foreign direct investment , foreign capital , liberalization , international economics , market economy , exchange rate , history , archaeology , politics , political science , law
. The paper has made an attempt to analyse the effects of liberalized trade and investment policies on welfare and open unemployment in a developing economy in terms of a three sector Harris‐Todaro type general equilibrium model. Following empirical evidence it is assumed that there is wage rigidity in urban sectors, which leads to the simultaneous existence of open unemployment and an urban informal sector in the migration equilibrium. The paper deserves special attention for its interesting results which are completely opposite to those generated by the standard Harris‐Todaro model.