An increased foreign capital inflow into a protected sector is generally immiserizing. We show that if the protected sector produces an intermediate input, positive welfare effects may emerge. A striking result is that it might lead to an increased import-demand for the intermediate input which...

Usually developing countries are characterised by capital scarcity and hence resort to stringent trade and capital control policies. This might become counterproductive and provide incentives to the international traders and investors for corrupt practices and as a result, scarce capital might...