This paper studies the e¤ect of income transfers on the distribution of economic activity through a modi…ed footloose entrepreneurs model. The model incorporates some key features of the Dutch Disease literature: sectorial mobility and nontradable goods. If foreign competition is high (high trade openness), transfers could cause a Dutch Disease in the short and long run. For intermediate levels of foreign competition, Dutch Disease appears only in the short run. And, for low levels, the recipient region always bene…ts from the income transfers. Additionally, when economies of scale are large, the transfers could perpetuate a core-periphery structure.