Urban unemployment, international capital mobility and development policy

doi:10.1016/0304-3878(93)90065-U

Journal of Development Economics

Volume 41, Issue 2, August 1993, Pages 399-403

https://doi.org/10.1016/0304-3878(93)90065-U Get rights and content

Abstract

We introduce international capital mobility into the Harris-Todaro model and examine the effectiveness of some policy tools. The main message is such that a wage subsidy in manufacturing and a tariff are no longer effective to improve welfare, while a wage subsidy in agriculture remains valid under the assumption of international capital mobility. This is in sharp contrast to the result obtained for the original Harris-Todaro model.

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In a two sector mobile capital Harris–Todaro model, such as [Corden, W.M., Findlay, R., 1975. Urban unemployment, intersectoral capital mobility, and development policy in a dual economy. Economica 42, 59–78], an inflow of foreign capital in the presence of protectionist policy is welfare deteriorating as well as unemployment accentuating. But, the developing countries have chosen liberalized investment and trade policies as their development strategies and have been able to attract a considerable amount of foreign capital during the last two decades. A relevant question is why these countries are yearning for foreign capital given its detrimental effects as predicted by the conventional theoretical literature on trade and development. This paper makes an attempt to address the above issue in terms of a three sector Harris–Todaro model with agricultural dualism and a non-traded final commodity. In the given setup, an inflow of foreign capital is likely to improve welfare and does not necessarily worsen the problem of unemployment. The paper may also be useful to explain as to why many of the developing economies have experienced ‘jobless growth’ in the liberalized regime.
Possibility or impossibility of paradoxes in the small country Harris-Todaro framework: A unifying analysis
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In this paper, we argue that the Harris-Todaro (HT) framework sometimes satisfies an “envelope” property, which makes it work like a full-employment Heckscher-Ohlin-Samuelson (HOS) model. Then, the HT structure produces very similar results as one gets in the standard HOS framework. Differences arise because the “envelope” condition may break down. We show how several celebrated results in the HT structure can have this reinterpretation.
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Tariff-induced capital inflow and welfare in the presence of unemployment and informal sector
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The co-existence of rural–urban migration and persistent urban unemployment is a common feature in developing countries. In this paper we draw on the Harris–Todaro model and extend it to include an urban informal sector where the product of the informal sector is used as an industrial input in the urban formal sector. We derive and contrast various welfare effects of tariff-induced capital inflow. Also, we analyze the welfare implications of employment subsidy as the policy instrument in the presence of international capital mobility.
Urban unemployment, international labor mobility and welfare
1997, Japan and the World Economy
This paper extends the Harris-Todaro model to include the possibility of international labor movement and analyze the effectiveness of some development policies, for example, wage subsidies and an import tariff. This possibility will change the conventional results that these policies raise the welfare from the laissez-faire level. We show that these policies lower the welfare in terms of internal (domestic) labor, but they improve the welfare if foreign labor is discriminated by wage tax, exploitation or other practices.
Environmental policy, comparative advantage, and welfare for a developing economy
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^∗: The author is indebted to Professors Motoshige Itoh and Katsuhiko Suzuki and other participants at the 29th Econometric Society meeting (Biwako Conference). I also would like to express my thanks to Professors Kemp and Khan, and two anonymous referees for many valued comments and suggestions that led to considerable improvement on the earlier version of this note. This research was financially supported by the Ishida Foundation (grant no. 91–548).

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Urban unemployment, international capital mobility and development policy

Abstract

Journal of Development Economics

Urban unemployment and the gains from trade

Economica

On reanalysing the Harris-Todaro model: Policy rankings in the case of sector-specific sticky wages

American Economic Review

Urban unemployment, intersectoral capital mobility and development policy

Economica

Migration, unemployment and development: A two-sector analysis

American Economic Review