The Transfer Paradox in a One-Sector Overlapping Generations Model
AbstractThis paper examines the effects of international income transfers on welfare and capital accumulation in a one-sector overlapping generations model. It is shown that a strong form of the transfer paradox-- in which the donor country experiences a welfare gain while the recipient country experiences a welfare loss—may occur both in and out of steady state. In addition, it is shown that a weak form of the transfer paradox—where either the donor or recipient (but not both) experience paradoxical welfare effects—may characterize all segments of the transition path not already characterized by the strong transfer paradox. The results are explained by the effects of transfers on world capital accumulation and the world interest rate, which imply secondary intertemporal welfare effects large enough to dominate the initial effects of the income transfer.
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Bibliographic InfoPaper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 159.
Length: 34 pages
Date of creation: Aug 2007
Date of revision:
Other versions of this item:
- Cremers, Emily T. & Sen, Partha, 2008. "The transfer paradox in a one-sector overlapping generations model," Journal of Economic Dynamics and Control, Elsevier, vol. 32(6), pages 1995-2012, June.
- Partha Sen & Emily T. Cremers, 2010. "The Transfer Paradox in a One-Sector Overlapping Generations Model," Working Papers id:2851, eSocialSciences.
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F35 - International Economics - - International Finance - - - Foreign Aid
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-02-02 (All new papers)
- NEP-DGE-2008-02-02 (Dynamic General Equilibrium)
- NEP-SEA-2008-02-02 (South East Asia)
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