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Discussion Paper Details

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Title: Unemployment, Investment and Sectoral Reallocation

Author(s): Bankim Chadha and Fabrizio Coricelli

Publication Date: January 1995

Keyword(s): Development, Investment, Restructuring and Unemployment

Programme Area(s): International Macroeconomics

Abstract: This paper presents a model of development of an economy comprised of a rural-agricultural sector and an urban-industrial sector. The interaction of investment with unemployment creates a channel for potentially divergent long-run outcomes. If the urban-industrial capital stock falls short of a threshold level, the urban-industrial sector will not develop. If the capital stock is high enough, there is a unique path by which it will develop. Between these two extremes is a region of indeterminacy where expectations can play a pivotal role in determining the long-run outcome.

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Bibliographic Reference

Chadha, B and Coricelli, F. 1995. 'Unemployment, Investment and Sectoral Reallocation'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1110