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Tied to Capital or Untied Foreign Aid?

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Author Info
Michael, Michael S
van Marrewijk, Charles

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Abstract

A two-country trade model of foreign aid is developed. The aid-receiving country suffers from Harris-Todaro type unemployment. Aid is either untied, tied to sector-specific capital, or tied to intersectorally mobile capital. These types of aid are compared by examining their terms-of-trade and welfare effects to show that (i) welfare paradoxes are possible, (ii) the world as a whole may gain from aid, (iii) a conflict of interest concerning the type of aid may arise between donor and recipient, and (iv) under plausible conditions untied aid is better for the recipient and the world. Copyright 1998 by Blackwell Publishing Ltd

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Publisher Info
Article provided by Blackwell Publishing in its journal Review of Development Economics.

Volume (Year): 2 (1998)
Issue (Month): 1 (February)
Pages: 61-75
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Handle: RePEc:bla:rdevec:v:2:y:1998:i:1:p:61-75

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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Muneyuki Saito & Yasuyuki Sugiyama, 2007. "Transfer of Pollution Abatement Technology and Unemployment," Economics Bulletin, Economics Bulletin, vol. 6(5), pages 1-8. [Downloadable!]
  2. Steven Brakman & Harry Garretsen & Charles van Marrewijk, 2006. "Agglomeration and Aid," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
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