It is shown that in an overlapping generations model, a strong transfer paradox occurs through permanent transfer in a dynamically efficient region because of international capital mobility. A graphical explanation is also provided to show how the strong paradox arises.

This paper, incorporating public goods into a two-country Diamond overlapping generations model, shows the existence of a transfer paradox. Governments supply public goods, in addition to imposing a tax on workers and issuing government bonds. In the short-run, only a weak paradox can occur, but...

It is shown that in an overlapping generations model, a strong transfer paradox occurs through permanent transfer in a dynamically efficient region because of international capital mobility. A graphical explanation is also provided to show how the strong paradox arises.