In the famous debate between Keynes and Ohlin on the transfer problem, the interaction between non-traded goods and unemployment complicates the analysis considerably. We analyze these issues using four different models to conclude that Keynes’s concern regarding the large burden imposed on Germany was justified. Simultaneously, we show that Ohlin’s presumption that a transfer does not affect the donor’s terms-of-trade either favourably or unfavourably was also justified. Moreover, Ohlin was also right in asserting that a transfer tends to lower the price of non-traded goods for the donor and raise them for the recipient.

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Keywords Keynes-Ohlin debate, international trade theory
JEL History of Economic Thought, Methodology, and Heterodox Approaches: General (jel B0), International Economics: General (jel F0), Economic Development (jel O1)
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Journal History of Political Economy
Brakman, S, & van Marrewijk, J.G.M. (2007). Transfers, non-traded goods, and unemployment: an analysis of the Keynes – Ohlin debate. History of Political Economy, 39(1), 121–143. doi:10.1215/00182702-2006-026