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Transfers, the Terms of Trade and Capital Accumulation

Author

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  • Cremers, Emily
  • Sen, Partha

Abstract

In 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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Suggested Citation

  • Cremers, Emily & Sen, Partha, 2011. "Transfers, the Terms of Trade and Capital Accumulation," Staff General Research Papers Archive 34611, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:34611
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    Cited by:

    1. Filippo Balestrieri & Mr. Suman S Basu, 2018. "An Imperfect Financial Union With Heterogeneous Regions," IMF Working Papers 2018/205, International Monetary Fund.
    2. Agarwal, Samanvaya & Kamath, Saipriya & Subramanian, Krishnamurthy & Tantri, Prasanna, 2022. "Board conduct in banks," Journal of Banking & Finance, Elsevier, vol. 138(C).
    3. Nagae, Akira & Katayama, Hajime & Takase, Koichi, 2022. "Donor aid allocation and accounting standards of recipients," Economic Modelling, Elsevier, vol. 106(C).
    4. Brakman, Steven & van Marrewijk, Charles, 2025. "International money transfers; Paradoxes and the balance-of-payments," Economics Letters, Elsevier, vol. 254(C).
    5. Partha Sen, 2023. "Social security reform and welfare in a two sector model," The Japanese Economic Review, Springer, vol. 74(2), pages 233-249, April.

    More about this item

    JEL classification:

    • 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, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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