Discussion Paper

No. 2017-1 | January 03, 2017
Foreign capital inflow and its welfare implications in a developing country context


In a small open developing country context, the author considers a three-sector general equilibrium framework and tries to find out the effects of foreign capital inflow on welfare of the country. Comparative-static results show that foreign capital inflow widens the skilled-unskilled wage gap under some reasonable conditions, although it causes an expansion of the foreign enclave and the agricultural sector and contraction of the domestic manufacturing sector. Taking sector specific foreign capital, the author finds that foreign direct investment is beneficial in a small open economy in the absence of tariffs.

JEL Classification

D50 D60 F4 F63 O11

Cite As

Rudrarup Mukherjee (2017). Foreign capital inflow and its welfare implications in a developing country context. Economics Discussion Papers, No 2017-1, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2017-1


Comments and Questions

Anonymous - Referee Report 1
January 05, 2017 - 08:29

see attached file

Anonymous - Referee Report 2
January 12, 2017 - 08:28

see attached file

Anonymous - Reply to the comments
January 16, 2017 - 14:03

In this part the author has made his best effort to address the questions raised by honorable referees.

Anonymous - Answers to the review
January 17, 2017 - 14:52

Here the author has made his level best effort to answer the queries of honorable referees.