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Sector specific foreign investment, labour inflow, economies of scale and welfare
Journal article   Peer reviewed

Sector specific foreign investment, labour inflow, economies of scale and welfare

Sajid Anwar
Economic Modelling, Vol.26(3), pp.626-630
2009
url
https://doi.org/10.1016/j.econmod.2009.01.009View
Published Version

Abstract

foreign investment economics of scale welfare
This paper argues that the impact of foreign investment on welfare depends on the sector that attracts the investment and certain characteristics of the economy. It is shown that, as long as the intermediate good is non-traded, foreign investment in a sector that is subject to economies of scale increases welfare by increasing the size of the intermediate good sector. On the other hand, foreign investment in a sector that is subject to constant returns to scale decreases welfare by decreasing the size of the intermediate good sector. The impact of foreign investment (in either sector) on welfare depends on relative factor intensities when the intermediate good is traded.

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