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Journal of Economic Integration 2012 March;27(1) :123-133.
DOI: https://doi.org/10.11130/jei.2012.27.1.123
Revisiting the Apparent Paradox: Foreign Capital Inflow, Welfare Amelioration and ‘Jobless Growth’ with Agricultural Dualism and Non-traded Intermediate Input
Soumyatanu Mukherjee 
Department of Economics, University of Calcutta, 56A, B.T. Road, Kolkata 700050, India. Tel: +913325576472 (R), +919434116277(Mobile). E-mail: soumyatanu.mukherjee@yahoo.com
Copyright ©2012 Journal of Economic Integration
ABSTRACT

In order to answer the pertinent question why developing countries are showing penchant for foreign capital over the last two decades in spite of its detrimental effects as revealed from the conventional two-sector mobile capital version of Harris–Todaro (HT) model in the presence of protectionist policy; this paper, in terms of a three-sector HT type general equilibrium model with agricultural dualism where advanced agricultural sector produces a non-traded intermediate input using capital apart from labour and land for the agro-based industry in the urban sector, tries to show that foreign capital inflow may not only improve social welfare, but also lower the magnitude of urban unemployment of labour or may lead to the phenomenon of ‘jobless growth’.

JEL Classification: C62, C68, F16, F11, F21, J01, J21, O18

Keywords: Foreign Capital | Agricultural Dualism | Non-traded Intermediate Input | Welfare | Urban Unemployment | Jobless Growth | Stolpersamuelson Theorem
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