Attracting foreign investment: Optimal ODA policy with trade liberalization
AbstractThis paper presents a theoretical framework for analyzing the efficient use of foreign aid (ODA) in attracting foreign direct investment, based on the variant of recent economic geography models. A salient result is that recipient countries with less trade openness should direct ODA towards social infrastructure, whereas it should be aimed toward developing economic infrastructure if the target country is a sufficiently open economy. The second result is that, in spite of optimal ODA policy, capital might outflow temporarily from less-developed countries at the beginning of trade liberalization. These results are consistent with empirical observations of 74 recipient countries for the time period 1991�-�2001.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal The Journal of International Trade & Economic Development.
Volume (Year): 16 (2007)
Issue (Month): 2 ()
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- Carro, Martha & Larrú, José María, 2010. "Flowing Together or Flowing Apart: An Analysis of the Relation between FDI and ODA Flows to Argentina and Brazil," MPRA Paper 25064, University Library of Munich, Germany.
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