Job-search and FDI in a two-sector general equilibrium model

Titas Bandopadhyay and Sarbajit Chaudhuri

MPRA Paper from University Library of Munich, Germany

Abstract: The purpose of this paper is to extend the Fields’ (1989) multi sector job-search model by introducing international trade and capital. Two types of capital are considered: fixed capital and mobile capital. The effects of search intensity and the inflow of foreign capital on the volume and the rate of urban unemployment and on the social welfare are also examined in both of the two cases. The main finding is: more efficient on-the-job search from the rural sector raises unemployment rate when capital is mobile between the two sectors. This is counterproductive to the standard result.

Keywords: Job search; foreign capital; unemployment rate; ex-post labour; ex-ante labour; general equilibrium (search for similar items in EconPapers)
JEL-codes: F10 I28 J10 (search for similar items in EconPapers)
Date: 2011-07-15
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