Foreign capital inflow and its welfare implications in a developing country context

Rudrarup Mukherjee

No 2017-1, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: In a small open developing country context, the author considers a three-sector general equilibrium framework and tries to find out the effects of foreign capital inflow on welfare of the country. Comparative-static results show that foreign capital inflow widens the skilled-unskilled wage gap under some reasonable conditions, although it causes an expansion of the foreign enclave and the agricultural sector and contraction of the domestic manufacturing sector. Taking sector specific foreign capital, the author finds that foreign direct investment is beneficial in a small open economy in the absence of tariffs.

Keywords: foreign capital; small open economy; welfare; tariff; economic development (search for similar items in EconPapers)
JEL-codes: D50 D60 F4 F63 O11 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-int and nep-opm
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https://www.econstor.eu/bitstream/10419/149135/1/877028710.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:20171

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