Immiserizing transfers from abroad
This paper shows that an international transfer payment may paradoxically immiserize the recipient country (or increase the donor country's welfare), even when world markets are stable, despite the traditional view that such a paradox theoretically requires market instability. To demonstrate this paradoxical possibility, the paper extends the conventional trade-theoretic analysis to admit exogenous distortions created by tax-cum-subsidies in domestic production, or endogenous distortions due to 'additionality' requirements imposed by the donor on the recipient. This analysis of immiserizing transfers from abroad immediately suggests significant implications for important policy issues, including the evaluation of real benefits from foreign aid.
|Journal||Journal of International Economics|
Brecher, R.A, & Bhagwati, J.N. (Jagdish N.). (1982). Immiserizing transfers from abroad. Journal of International Economics, 13(3-4), 353–364. doi:10.1016/0022-1996(82)90063-0