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Tied Aid Revisited: A Reexamination of the Kemp-Kojima Results in the Presence of Environmental Externalities

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  • Takumi Haibara

    (Graduate School of International Cooperation Studies (GSICS); Kobe University, Japan)

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    Abstract

    Tied aid invites a Pareto-improving situation in the presence of environmental externalities. Under certain conditions, although the aid recipient government's marginal propensity to consume the purchased good is lower or higher than the corresponding marginal propensity of the aid recipient individuals, the welfare of both the donor and the recipient improves in the presence of production- or consumption-based pollution. This result counters the conventional wisdom of tied aid presented by Kemp and Kojima (1985).

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    Bibliographic Info

    Article provided by Department of Economics, Delhi School of Economics in its journal Indian Economic Review.

    Volume (Year): 41 (2006)
    Issue (Month): 2 (December)
    Pages: 195-207

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    Handle: RePEc:dse:indecr:v:41:y:2005:i:2:p:195-207

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    Related research

    Keywords: Tied aid; Production-based pollution; Consumption-based pollution; Terms of trade;

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