Effects of Transfers on Remote Regional Economies: The Transfer Economy in Rural Alaska

Abstract

In this paper we examine the effects of transfers on the economies of remote regions. A model which describes the consequences of different types of transfers on settlement patterns is developed. The growth of the transfer economy in rural Alaska and its effect on population and income is reviewed. We find that transfer programs in remote regions may have consequences far broader than their original intent. While the programs may improve the standard of living for regional residents, they may also lead to inefficient settlement patterns, increasing dependence on transfers, and a higher cost of eventual adjustment.