Foreign Capital Inflow and Regional Immiserization

( Bharat R. Hazari ),( Pasquale M. Sgro ) 세종대학교 경제통합연구소 (구 세종대학교 국제경제연구소) 1998 Journal of Economic Integration Vol.13 No.3

In recent years a number of papers have examined the impact of inflow of foreign capital on welfare in a trade theoretic model. Two fundamental questions have been raised in this literature. First, what is the welfare impact of foreign capital inflow under a laissez faire regime? Second, what is the impact of tariff induced capital inflow on welfare? In this paper we depart from the Heckscher-Ohlin framework where there is only one representative agent whose welfare is considered. We exploit a trade theoretic framework to analyse the impact on an inflow of foreign capital on regional welfare, in particular, urban and rural incomes. The analysis is undertaken in a four goods, two region model where each region produces and consumes its own non-traded good. Foreign capital is only used in the urban region and its inflow is treated initially as exogenous and later endogenised via a movement in the terms-of-trade. An exogenous inflow of foreign capital necessarily raises aggregate urban income irrespective of capital intensity conditions. The rural region is ‘immiserized’ by the inflow of foreign capital provided that the rural traded good is more capital intensive than the rural non-traded good. In this framework rural employment always falls and urban employment always rises. In the case where foreign capital inflow is induced by a change in the terms-of-trade, immiserization may occur in both regions depending on the capital intensities in all sectors. This paper highlights the locational implication of the inflow of foreign capital. (JEL Classification: F2, O1, R1)

Foreign Capital Inflow and Regional Immiserization

Hazari, Bharat R.,Sgro, Pasquale M. 세종대학교 국제경제연구소 1998 Journal of Economic Integration Vol.13 No.3

In recent years a number of papers have examined the impact of inflow of foreign capital on welfare in a trade theoretic model. Two fundamental questions have been raised in this literature. First, what is the welfare impact of foreign capital inflow under a laissez faire regime? Second, what is the impact of tariff induces capital inflow on welfare? In this paper we depart from the Heckscher-Ohlin framework where there is only one representative agent whose welfare is considered. We exploit a trade theoretic framework to analyse the impact on an inflow of foreign capital on regional welfare, in particular, urban and rural incomes. The analysis is undertaken in a four goods, two region model where each region produces and consumes its own non-traded good. Foreign capital is only used in the urban region and its inflow is treated initially as exogenous and later endogenised via a movement in the terms-of-trade. An exogenous inflow of foreign capital necessarily raises aggregate urban income irrespective of capital intensity conditions. The rural region is 'immiserized' by the inflow of foreign capital provided that the rural traded good is more capital intensive than the rural non-traded good. In theis framework rural employment always falls and urban employment always rises. In the case where foreign capital inflow is induced by a change in the terms-of-trade, immiserization may occur in both regions depending on the capital intensities in all sectors. This paper highlights the locational implication of the inflow of foreign capital. (JEL Classification: F2, O1, R1)

Articles : A Note on the Employment Effects of an Export Boom

( Bharat R. Hazari ),( Pasquale M. Sgro ) 세종대학교 경제통합연구소 1990 Journal of Economic Integration Vol.5 No.2

This paper utilizes the Heckscher-Ohlin type model with unemployment and non-traded goods to examine the effect of an export boom on the real exchange rate, sectoral outputs, unemployment, factor incomes and welfare. It is demonstrated that in the presence of unemployment ``Dutch Disease`` type results critically depend on the relative factor intensities of the export and import-competing sectors. In a distortionary setting the issue of ``Dutch Disease`` needs to be explored empircally via the use of computable general equilibrium models so that the ambiguities can be resolved case by case.

CAPITAL MOBILITY , TARIFFS, UNEMPLOYMENT AND THE REAL EXCHANGE RATE

HAZARI, BHARAT R.,SGRO, PASQUALE M. 한국국제경제학회 1996 International Economic Journal Vol.10 No.3

A Note on the Employment Effects of an Export Boom

Hazari, Bharat R.,Sgro, Pasquale M. 세종대학교 국제경제연구소 1990 Journal of Economic Integration Vol.5 No.2

This paper utilizes the Heckscher-Ohlin type model with unemployment and non-traded goods to examine the effect of an export boom on the real exchange rate, sectoral outputs, unemployment, factor incomes and welfare. It is demonstrated that in the presence of unemployment 'Dutch Disease' type results critically depend on the relative factor intensities of the export and import-competing sectors. In a distortionary setting the issue of 'Dutch Disease' needs to be explored empircally via the use of computable general equilibrium models so that the ambigutites can be resolved case by case.

The Theory of Transfers in a Multilateral World: The Customs Union Case with Structural Adjustment

( Yves Fluckiger ),( Bharat R. Hazari ) 세종대학교 경제통합연구소 1996 Journal of Economic Integration Vol.11 No.2

In this paper the transfer problem is analysed in a three country, three commodity (including one non-traded good) trade model where two countries belong to a customs union. The three countries A, B and C each produce three goods and engage in an asymmetric pattern of trade. Countries A and B form a customs union and C remains outside the union. Several results are obtained. Following the tradition in the literature on transfers and the terms of trade the results are classified into three groups: orthodox, anti-orthodox and mixed. In the orthodox case, donor (recipient) impoverishment (enrichment) occurs irrespective of the favourable (adverse) movement in the terms of trade. In the anti-orthodox case, donor (recipient) enrichment (impoverishment) occurs as a consequence of the favourable movement in the term of trade. In the mixed cases, the outcomes are not clearcut. The major result that we obtain is that changes in welfare, terms of trade and the relative price of the non-trad-ed good are identical in the donor and the non-participating country as a consequence of the transfer Thus an intra union transfer has effects on the nonparticipating country. Consider the orthodox case. Country B (donor) makes a transfer to country A (recipient), who are both in the union. Country B`s welfare falls, terms of trade deteriorate and the relative price of the non-traded good falls. Country C, the non-participating country, suffers from the same effects. Structural adjustments occur in all the three countries-output of the non-traded good changes vis-a-vis the traded good and this change in composition is identical for the donor and the non-union country. In the anti-orthodox case both the donor and the non-participant country gain from the transfer The non-union country cannot remain passive to transfers among the union members. (JEL F0l, F02)

The Theory of Transfers in a Multilateral World : The Customs Union Case with Structural Adjustment

Flu¨ckiger, Yves,Hazari, Bharat R. 세종대학교 국제경제연구소 1996 Journal of Economic Integration Vol.11 No.2

In this paper the transfer problem is analysed in a three country, three commodity (including one non-traded good) trade model where two countries belong to a customs union. The three countries A, B and C each produce three goods and engage in an asymmetric pattern of trade. Countries A and B form a customs union and C remains outside the union. Several results are obtained. Following the tradition in the literature on transfers and the terms of trade the results are classified into three groups: orthodox, anti-orthodox and mixed. In the orthodox case, donor (recipient) impoverishment (enrichment) occurs irrespective of the favourable (adverse) movement in the terms of trade. In the anti-orthodox case, donor (recipient) enrichment (impoverishment) occurs as a consequence of the favourable movement in the term of trade. In the mixed cases, the outcomes are not clearcut. The major result that we obtain is that changes in welfare, terms of trade and the relative price of the non-traded good are identical in the donor and the non-participating country as a consequence of the transfer. Thus an intra union transfer has effects on the non-participating country. Consider the orthodox case. Country B (donor) makes a transfer to country A (recipient), who are both in the union. Country B's welfare falls, terms of trade deteriorate and the relative price of the non-traded good falls. Country C, the non-participating country, suffers from the same effects. Structural adjustments occur in all the three countries-output of the non-traded good changes vis-a-vis the traded good and this change in composition is identical for the donor and the non-union country. In the anti-orthodox case both the donor and the non-participant country gain from the transfer. The non-union country cannot remain passive to transfers among the union members.(JEL:F01, F02)