IDEAS home Printed from https://ideas.repec.org/a/gok/ijdcv1/v1y2011i3p379-397.html
   My bibliography  Save this article

Multiple equilibria and welfare effects of transfers in a two-country dynamic general equilibrium model

Author

Listed:
  • Hu, Yunfang
  • Shimomura, Koji

Abstract

This paper examines the relationship between the dynamic stability of steady state equilibrium and the welfare effects of international transfers in a two-country dynamic Heckscher–Ohlin model. We find that local stability properties of the steady state equilibrium may link closely to the welfare aspect of international transfers. When the two consumption goods exhibit asymmetric properties with respect to income change, multiple steady state equilibria are possible. The usual donor-loss, recipient-benefit result prevails at the saddle-point stable steady state. When a continuum of equilibrium paths exists around one steady state (indeterminacy), transfer paradoxes may occur. Furthermore, we examine the welfare effects of endogenously determined transfers. When international transfers are voluntary unrequited, a positive optimal transfer benefits both the donor and the recipient country. When the optimal transfer is negative, a positive transfer may still benefit the donor country when the world economy starts from an indeterminate steady state.

Suggested Citation

  • Hu, Yunfang & Shimomura, Koji, 2011. "Multiple equilibria and welfare effects of transfers in a two-country dynamic general equilibrium model," International Journal of Development and Conflict, Gokhale Institute of Politics and Economics, vol. 1(3), pages 379-397.
  • Handle: RePEc:gok:ijdcv1:v:1:y:2011:i:3:p:379-397
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/pdf/10.1142/S2010269011000282
    Download Restriction: no

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gok:ijdcv1:v:1:y:2011:i:3:p:379-397. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/gipepin.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.