Transfers, structural change, welfare, and unemployment in a North-South framework

This paper analyzes the impact of a transfer, from the North to the South, on the production structure, unemployment and welfare in both regions. It is shown that the standard expressions for gain or loss in welfare are modified to include an employment effect in both the North and the South. Two new paradoxes are provided which are labeled the strong-strong paradox and the quasi-weak paradox. The strong-strong paradox occurs when the donor benefits both in welfare and employment and the recipient loses in terms of both welfare and employment. It is also shown that the transfer may result in "Dutch Disease"-type phenomenon in both the North and the South; hence, transfers have implications for structural adjustment for both the donor and the recipient.