Liberalisation and Structural Change with Rural–Urban Dichotomies: A General Equilibrium Outlook

This chapter deals with the structural change and employment outcomes of welcoming FDI and opening the import-competing sector of the economy to more foreign competition within the framework of a three-sector mobile capital version of Harris–Todaro (HT hereafter) type general equilibrium model, describing rural–urban migration, with the existence of a rural nonfarm sector producing non-traded intermediate input. Main findings support the fact that because of different trade reform policies, registered urban manufacturing sectors have experienced increased competition from foreign markets which has forced them to switch towards relatively capital-intensive techniques of production, resulting in the retrenchment of relatively less productive workers and ending up with jobless pattern of growth in these sectors during the liberalised regime. These results are predominantly fascinating for the counterintuitiveness of the predictions, as opposed to the standard HT model.