Endogenous Labour Market Imperfections, FDI and External Terms-of-Trade Shocks in a Developing Economy
Sarbajit Chaudhuri ()
MPRA Paper from University Library of Munich, Germany
This paper shows that developing countries possess an inherent shock-absorbing mechanism that stems from their peculiar institutional characteristics and can lessen the gravity of detrimental welfare consequence of exogenous terms-of-trade disturbances in terms of a two-sector, full-employment general equilibrium model with endogenous labour market distortion. The supply of foreign capital in the economy is a positive function of the return to capital and a decreasing function of the degree of prevailing restrictions in the economy in the process of free inflow of foreign capital. The analysis leads to a couple of important policies that should be adhered to preserve this in-built system. Finally, it offers three important statistically testable hypotheses, empirical validation of which might have an important bearing on formulation of developmental policies in these countries.
Keywords: Terms-of-trade shocks; Endogenous labour market imperfection; Supply function of FDI; Shock-absorbing mechanism; Social welfare; Developing countries; General equilibrium. (search for similar items in EconPapers)
JEL-codes: D59 D6 D60 F21 F61 J42 J52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/61594/1/MPRA_paper_61594.pdf original version (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:61594
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().