Transfer Paradox and Indeterminacy in a Dynamic General Equilibrium Model of International Trade


This paper connects a traditional topic in trade theory with a new topic in economic dynamics in a simple two(-country) by two(-good) dynamic general equilibrium (dge) model by showing that the transfer paradox, or the donor-enrichment and recipient-impoverishment transfer, is possible if and only if the indeterminacy, or the existence of a continuum of dge paths, occurs. The result is a substantial contribution to both topics, since we assume neither the presence of a by-stander country nor any source of distortion like externality, increasing returns. government intervention or imperfect competition.

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