Foreign Capital, Processing Incentives, and Urban Unemployment

Gilbert, John; Wahl, Thomas

doi:2002.17.2.262

The Journal of Economic Integration 2002 June;17(2) :262-272.
DOI: https://doi.org/10.11130/jei.2002.17.2.262

Foreign Capital, Processing Incentives, and Urban Unemployment

John Gilbert, Thomas Wahl,

Utah State University
Washington State University

ABSTRACT

We use a general equilibrium model of a small developing economy with urban unemployment to illustrate the impact of processing incentives in the presence of foreign owned factors of production. We show that the location of the processing industry plays a crucial role in determining whether or not processing incentives will raise welfare through employment effects, but, once stability conditions are imposed, does not alter the positive investment terms-of-trade effect resulting from foreign ownership of resources.

Keywords: f

REFERENCE

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2.	Marjit, S., Broll, U. and Mitra, S. (1997), "Targeting Sectors for Foreign Capital Inflow in a Small Developing Economy" Review of International Economics 5(1):101-6.