Factor Growth, Urban Unemployment and Welfare Under Variable Returns to Scale

Jai-Young Choi

International Economic Journal, 1999, vol. 13, issue 4, 17-34

Abstract: This paper analyzes the welfare implications of factor growth (i.e., labor growth and capital accumulation), in the mobile-capital Harris-Todaro (H-T) model by allowing the presence of variable returns to scale (VRS). It is shown that in contrast to the constant returns to scale (CRS) case, factor growth under VRS may lower the welfare of a small country and can affect the urban unemployed-employed ratio and the factor prices. Further, under VRS, the Rybczynski-type of factor endowment-output response requires much more stringent conditions (vis-a vis the CRS case). [F12, O41]

Date: 1999
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DOI: 10.1080/10168739900000042

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