Optimal Income Transfers and Tariffs

Sajal Lahiri, Pascalis Raimondos (), Kar-yiu Wong and Alan Woodland

No 97-06, EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics

Abstract: This paper investigates the optimality of international income transfers in a two-country model in which each country engages in non-cooperative trade policy behaviour. It is shown that unconditional income transfers can never be optimal for the donor country, which not only suffers the loss of income but is harmed as the recipient responds optimally by raising tariffs. It is further shown that it is possible for the donor to attach carefully designed conditionality rules to the aid package to ensure that the recipient will agree to the package and that the donor's welfare is improved. In fact, the use of conditional income transfers is shown to result in a Pareto efficient equilibrium.

New Economics Papers: this item is included in nep-lab
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://web.econ.ku.dk/epru/files/wp/wp9706.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://web.econ.ku.dk/epru/files/wp/wp9706.pdf [301 Moved permanently]--> https://web.econ.ku.dk/epru/files/wp/wp9706.pdf)

Related works:
Working Paper: Optimal Income Transfers and Tariffs (1998)
Working Paper: Optimal Income Transfers and Tariffs (1998)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kud:epruwp:97-06

Access Statistics for this paper

More papers in EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics �ster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark. Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Hoffmann ().