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Globalization, Unemployment, And Excess Capacity : A Model And A Conjecture, Lok Sang Ho
Globalization, Unemployment, And Excess Capacity : A Model And A Conjecture, Lok Sang Ho
Centre for Public Policy Studies : CPPS Working Paper Series
Using a theoretical model with an industrial world trading with a developing world and assuming no impediment to capital flows, it is shown that an abundant supply of unskilled labor will render real wages for the unskilled close to the subsistence level and will result in excess capacity. The rate of return for traditional manufacturing investment at the margin will decline so funds will seek to invest in financial assets and real property, boosting their prices. Under reasonable assumptions about the income elasticity and the price elasticity of demand for manufacturing products in rich and poor countries, it is shown …