Abstract
This paper utilizes a generalized two-sector model of a small open economy that features a binding real minimum wage, specific factor and variable returns to scale. The results presented indicate that capital accumulation increases total employment in the distorted economy and that all of the growth occurs in the sector that does not employ the specific factor. However, an increase in the availability of public land will increase total employment in the economy only when the sector that employs the specific factor is not capital intensive relative to the alternate sector.
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