FOREIGN ENCLAVES AND ECONOMIC-DEVELOPMENT - A THEORETICAL-ANALYSIS

We consider an urban foreign enclave with sector-specific foreign capi tal in an otherwise mobile-capital Harris-Todaro model. We consider th e taxation of foreign capital. A dynamic version of this model is cons idered. The long-run equilibrium and the comparative steady-state effe cts are analyzed. We get some interesting effects of reduction in tax rate on foreign capital on the short-run and the long-run equilibrium levels of domestic factor income and national income under some meanin gful conditions.