We consider economies with additively separable utility functions and give conditions for the two-agents case under which the existence of sunspot equilibria is equivalent to the occurrence of the transfer paradox. This equivalence enables us to show that sunspots cannot matter if the initial...

We show that for international economies with two countries, in which agents have additively separable utility functions, the existence of sunspot equilibria is equivalent to the occurrence of the transfer paradox. This equivalence enables us to provide some new insights on the relation of the...

We consider economies with additively separable utility functions and give conditions for the two-agents case under which the existence of sunspot equilibria is equivalent to the occurrence of the transfer paradox. This equivalence enables us to show that sunspots cannot matter if the initial...

This paper corrects an error in Palley (2013) and offers an alternative interpretation of the difference between Cambridge and Kaleckian growth models. Using a Cambridge model with a variable profit share and full utilization of capital, a fiscal transfer from capitalists to workers is shown to...

The transfer paradox describes a situation in which a transfer ofendowments between two agents results in a welfare decrease for therecipient and a welfare increase for the donor. It is known that ina two-agent regular exchange economy with an arbitrary number ofgoods, the transfer paradox...

Academic and policy debates on aid effectiveness frequently emphasise the vulnerability of recipients to the Dutch Disease, through which aid inflows appreciate the real exchange rate, thereby taxing the tradable export sector with potentially deleterious effects on growth. Fear of the Dutch...

The static trade literature has concluded that, absent distortions and bystanders, transfer induced movements in the terms of trade cannot be large enough (under Walrasian stability) to produce the transfer paradox. Dynamic one-sector models have argued that a transfer paradox is possible, but...

Aid for trade is a new foreign aid initiative to assist recipient countries to build trade-related infrastructure. We formulate a small-country, two-good (i.e., investment and consumption goods), two-factor (i.e., capital and labor) endogenous growth model with learning by doing and...

The motivation of our paper comes from David Gale’s seminal work in 1974. He constructed an example of the “transfer paradox” based on three Leontief functions. The transfer paradox is that when there is a set of agents in the home country and that the home country is trading with other...

This paper examines the effects of international income transfers on capital accumulationand welfare in a one-sector overlapping generations model. It is shown that a strong form ofthe transfer paradox – in which the donor country experiences a welfare gain while therecipient country...