Transfers, the Terms of Trade and Capital Accumulation
AbstractIn the context of a two-sector overlapping-generations model it is demonstrated that a steady-state transfer paradox may arise under commodity trade with stability and without distortions or bystanders. The existence of the paradox is due to the effect of the transfer on world capital accumulation, which is shown to always (i.e., for any ranking of factor intensities and savings rates) improve the donor's terms of trade. Transfers may also improve steady-state welfare for both donor and recipient and produce paradoxical welfare results along the transition path.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 34848.
Date of creation: 01 Jan 2009
Date of revision:
Publication status: Published in Canadian Journal of Economics 2009, vol. 42 no. 4, pp. 1599-1616
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
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Web page: http://www.econ.iastate.edu
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Other versions of this item:
- Emily T. Cremers & Partha Sen, 2009. "Transfers, the terms of trade, and capital accumulation," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 42(4), pages 1599-1616, November.
- Cremers, Emily & Sen, Partha, 2011. "Transfers, the Terms of Trade and Capital Accumulation," Staff General Research Papers, Iowa State University, Department of Economics 34611, Iowa State University, Department of Economics.
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
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