Immiserizing Transfer under Variable Returns to Scale

Jai-Young Choi and Eden Yu

Canadian Journal of Economics, 1987, vol. 20, issue 3, 634-45

Abstract: This paper examines the welfare consequences of a unilateral transfer for both the transfer-paying a nd the transfer-receiving country in which the production functions a re subject to variable returns to scale. The authors obtain the condi tions for the strong paradox, i.e., the welfare of the transfer-payin g country improves and that of the transfer-receiving country decline s in the standard two-country framework. The conditions for the weak paradox, i.e., both the transferor and transferee gain or lose simult aneously, and the normal results, i.e., the transferor loses and the transferee gains, are also derived.

Date: 1987
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