The Economics of International Transfers

Steven Brakman and Charles van Marrewijk; Cambridge University Press

 

Contents

 

List of chapters

List of tables

List of figures

Plan of the book

 

List of chapters

1. General overview and stylized facts

2. The Keynes-Ohlin controversy

3. Welfare effects: Samuelson's theorem

4. Generalizations of Samuelson's theorem

5. Clouds on the horizon 1: distortions

6. Clouds on the horizon 2: third parties

7. The economics of multilateral transfers

8. The consequences of tied aid

9. Imperfect competition

10 Dynamics, money, and the balance of payments

Mathematical Appendix

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List of tables

Table 1.1 Net Transfers

Table1.2 Britain's Foreign Trade 1796-1816, compared with unilateral foreign Payments

Table 1.3 French Foreign Trade 1867-1875, compared with indemnity payments

Table 1.4 German Reparation Payments, 1925-1932

Table 1.5 German Foreign Trade 1925-1932, compared with reparation payments

Table 1.6 eastern Germany relative to western Germany

Table 1.7 Historical Examples of Transfers

Table 1.8 Ten largest Donor's of Official Development Assistance

Table 1.9 Total Net Development Assistance from DAC countries

Table 2.1 Production and consumption patterns

Table 5.1 Sector Specific Capital

Table 5.2 Capital Mobility

Table 8.1 Tying of bilateral ODA by DAC members

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List of figures

Figure 2.1 Keynes-Ohlin compared

Figure 3.1 Leontief's example of a transfer paradox

Figure 3.2 Transfers and a change in numéraire

Figure 3.3 Market stability and the offer curve

Figure 6.1 Gale's example of a transfer paradox

Figure 8.1 Forced choice

Figure 9.1 Aid tied to food

Figure 9.2 Aid tied to manufactures in general

Figure 10.1 Neoclassical growth model

Figure 10.2 Neoclassical growth model and transfers

Figure 11.1 Special cases of the utility function

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Plan of the book

The plan of the book is as follows. Chapter 1 gives a brief overview of the history of the transfer problem and some information on transfer flows. It highlights the fact that it was traditionally considered to be a problem of balance-of-payments adjustments. Chapter 2 summarizes the discussion on German war reparation payments between Keynes and Ohlin in 1929. It is important from an historical point of view, as the disagreement between Keynes and Ohlin paved the way for a systematic treatment of the transfer problem. One could argue that the modern literature on transfers takes this discussion as a starting point. Chapter 3 presents the core of this book. It not only illustrates that the transfer problem is not a problem in the sense of Keynes, but also introduces the main analytical tools for this book. Most chapters are relatively self-contained, but we advice the reader always to read chapter 3 before reading any of the other analytical chapters, because the conclusions serve as a benchmark for the results developed in other chapters. Chapter 4 generalizes the findings of chapter 3. The conclusions of chapters 3 and 4 change, in general, if distortions, such as tariffs or rent-seeking, are present. This is analyzed in chapter 5. In chapter 6 it is shown that, most surprisingly and maybe not intuitively clear at first, transfer paradoxes are possible in a perfectly competitive Walrasian-stable world with normal goods if a third country (the bystander) is introduced. Chapters 7 and 8 generalize the results of the earlier chapters in a number of ways. Does it matter, for instance, if aid is given by multilateral agencies? Or does it matter that, in practice, development aid is often given in the form of tied aid? Chapter 9 analyzes imperfect competition and economies-of-scale, also in combination with tied aid. It is shown that welfare is not only influenced by income and price effects, but also by a "love-of-variety" effect. Furthermore, and most interestingly, we show that profits are possible in this context even in equilibrium if aid is tied to a specific sector or commodity. Finally, transfers are frequently given to alleviate balance-of-payments disequilibria (often by means of foreign exchange). In fact, this is basically the role of the International Monetary Fund. Moreover, aid is given to put developing countries on a higher path of development. Both issues require that a dynamic framework must be introduced to analyze the consequences of aid. This is done in chapter 10.

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