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The short and long run effects of tied foreign aid on pollution abatement, pollution and employment: A pilot model

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  • Schweinberger, A.G.
  • Woodland, A.D.

Abstract

There exists in the literature a presumption that tied foreign aid can be used effectively to reduce cross-border pollution. Focusing, in contrast to the received literature, on the interaction between the public and private provisions of pollution abatement in the recipient country, we question the effectiveness of tied foreign aid in reducing pollution. In this context, we obtain many novel and policy relevant insights. Allowing for changes in labour employment and distinguishing between short and long run effects, tied foreign aid is shown to crowd out the private provision for pollution abatement in the short run. In the long run, tied foreign aid raises employment and therefore may be desirable for the recipient but undesirable for the donor country because it also raises pollution. The results change drastically if only the government provides pollution abatement.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 55 (2008)
Issue (Month): 3 (May)
Pages: 310-325

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Handle: RePEc:eee:jeeman:v:55:y:2008:i:3:p:310-325

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Web page: http://www.elsevier.com/locate/inca/622870

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References

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  1. Panos Hatzipanayotou & Sajal Lahiri & Michael S. Michael, 2000. "Can Cross-Border Pollution Reduce Pollution?," CESifo Working Paper Series 360, CESifo Group Munich.
  2. Copeland, Brian R & Taylor, M Scott, 1995. "Trade and Transboundary Pollution," American Economic Review, American Economic Association, vol. 85(4), pages 716-37, September.
  3. Brett, Craig & Keen, Michael, 2000. "Political uncertainty and the earmarking of environmental taxes," Journal of Public Economics, Elsevier, vol. 75(3), pages 315-340, March.
  4. John Beghin & David Roland-Holst & Dominique van der Mensbrugghe, 1994. "Trade and Pollution Linkages: Piecemeal Reform and Optimal Intervention," OECD Development Centre Working Papers 99, OECD Publishing.
  5. Kemp, Murray C & Kojima, Shoichi, 1985. "Tied Aid and the Paradoxes of Donor-Enrichment and Recipient-Impoverishment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 721-29, October.
  6. Lahiri, Sajal & Raimondos, Pascalis, 1995. "Welfare effects of aid under quantitative trade restrictions," Journal of International Economics, Elsevier, vol. 39(3-4), pages 297-315, November.
  7. Schweinberger, A. G., 2002. "Foreign aid, tariffs and nontraded private or public goods," Journal of Development Economics, Elsevier, vol. 69(1), pages 255-275, October.
  8. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
  9. Brecher, Richard A, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 88(1), pages 98-116, February.
  10. Lahiri, Sajal & Raimondos-Moller, Pascalis, 1997. "On the tying of aid to tariff reform," Journal of Development Economics, Elsevier, vol. 54(2), pages 479-491, December.
  11. Schweinberger, A G, 1990. "On the Welfare Effects of Tied Aid," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 457-62, May.
  12. Hatzipanayotou, Panos & Michael, Michael S., 1995. "Foreign aid and public goods," Journal of Development Economics, Elsevier, vol. 47(2), pages 455-467, August.
  13. Schweinberger, Albert G, 1978. "Employment Subsidies and the Theory of Minimum Wage Rates in General Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 92(3), pages 361-74, August.
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Cited by:
  1. Hadjiyiannis, Costas & Hatzipanayotou, Panos & Michael, Michael S., 2013. "Competition for environmental aid and aid fungibility," Journal of Environmental Economics and Management, Elsevier, vol. 65(1), pages 1-11.
  2. Alain-Désiré Nimubona & Horatiu Rus, 2011. "Green Technology Transfers and Border Tax Adjustments," Working Papers 1102, University of Waterloo, Department of Economics, revised May 2011.

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