Public goods and the transfer paradox in an overlapping generations model

Mitsuyoshi Yanagihara

The Journal of International Trade & Economic Development, 1998, vol. 7, issue 2, 175-205

Abstract: 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 in the long-run, both weak and strong paradoxes can occur. These paradoxical results depend on government policy concerning the level of supply of public goods, and on the difference in the levels of externality of public goods between the donor country and the recipient country. The transitional economy will also be discussed.

Keywords: Fiscal policy; foreign aid; public goods; macroeconomic analyses of economic development (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (8)

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DOI: 10.1080/09638199800000010

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