Journal article
Variable labour supply, specialisation-based external economies, and capital inflow
International Review of Economics and Finance, Vol.14(4), pp.427-437
2005
Abstract
This paper examines the impact of exogenous capital inflow on prices, production, labour supply, and welfare in the presence of specialisation-based externalities. The paper utilises a simple model of an economy that produces one-final good by means of capital, labour, and a large number of varieties of an intermediate good. The intermediate good is produced by means of capital and labour. The supply of capital is exogenous but the supply of labour is endogenous. The presence of internal economies of scale in the intermediate good industry gives rise to specialisation-based external economies in the production of the final good. Perfect competition prevails in the final good industry whereas the intermediate good industry operates under Chamberlinian monopolistic competition. It is shown that exogenous capital inflow decreases labour supply and increases welfare only if the elasticity of substitution between leisure and the final good is equal to or less than unity. The paper also shows that, if trade opens up between two otherwise similar economies, a capital rich country would be a net importer of varieties of the intermediate good.
Details
- Title
- Variable labour supply, specialisation-based external economies, and capital inflow
- Authors
- Sajid Anwar (Author) - University of South Australia
- Publication details
- International Review of Economics and Finance, Vol.14(4), pp.427-437
- Publisher
- Elsevier BV, North-Holland
- Date published
- 2005
- DOI
- 10.1016/j.iref.2004.01.002
- ISSN
- 1059-0560
- Organisation Unit
- School of Business and Creative Industries; Indigenous and Transcultural Research Centre; University of the Sunshine Coast, Queensland; USC Business School - Legacy
- Language
- English
- Record Identifier
- 99449751302621
- Output Type
- Journal article
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