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Chapter 3 Agglomeration and Aid

In: Theory and Practice of Foreign Aid

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  • Steven Brakman
  • Harry Garretsen
  • Charles Van Marrewijk

Abstract

We combine a key issue in development economics (explaining core-periphery patterns) for the first time with an analysis of unilateral transfers (foreign aid) using a New Economic Geography model. We show that (i) direct transfer paradoxes are not possible in a symmetric setting even if a bystander is present, (ii) the effects of foreign aid depend on the level of economic integration, (iii) aid only has a temporary effect (even if there is a bystander present) if the initial equilibrium is stable, and (iv) the recipient as well as the bystander benefits from foreign aid if the donor is large.

Suggested Citation

  • Steven Brakman & Harry Garretsen & Charles Van Marrewijk, 2006. "Chapter 3 Agglomeration and Aid," Frontiers of Economics and Globalization, in: Theory and Practice of Foreign Aid, pages 31-53, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:fegzzz:s1574-8715(06)01003-7
    DOI: 10.1016/S1574-8715(06)01003-7
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