Foreign Capital, Urban Unemployment and Economic Growth

Posted: 9 Oct 1998

See all articles by Michael Ka-yiu Fung

Michael Ka-yiu Fung

The Chinese University of Hong Kong (CUHK) - Department of Decision Sciences & Managerial Economics

Jinli Zeng

National University of Singapore (NUS) - Department of Economics

Li Jing Zhu

Hong Kong University of Science & Technology (HKUST) - Department of Economics

Abstract

Utilizing a three-sector endogenous growth model, we study the effects of foreign direct investment (FDI) on the dynamics of urban unemployment, labor income and capital income as well as national welfare in a Harris-Todaro economy. It is shown that more FDI can affect the economy's dynamics and national welfare in either way, positively or negatively. Further, we derive the conditions as to how the growth rate and welfare effects of FDI relate to the intersectoral mobility of capital, the destination of FDI, the elasticities of substitution, and the factor intensities of the final good production.

JEL Classification: E20, F21, F41

Suggested Citation

Fung, Michael Ka-yiu and Zeng, Jinli and Zhu, Li Jing, Foreign Capital, Urban Unemployment and Economic Growth. Available at SSRN: https://ssrn.com/abstract=136028

Michael Ka-yiu Fung (Contact Author)

The Chinese University of Hong Kong (CUHK) - Department of Decision Sciences & Managerial Economics ( email )

Shatin, N.T.
Hong Kong
852-2609-7819 (Phone)
852-2603-5104 (Fax)

Jinli Zeng

National University of Singapore (NUS) - Department of Economics ( email )

1 Arts Link, AS2 #06-02
Singapore 117570, Singapore 119077
Singapore

Li Jing Zhu

Hong Kong University of Science & Technology (HKUST) - Department of Economics

Clear Water Bay
Kowloon, Hong Kong
China

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