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Foreign Aid Reduces Labor Supply and Capital Accumulation

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  • Liutang Gong
  • Heng-fu Zou

Abstract

In an optimal growth model with foreign aid, foreign borrowing, and endogenous leisure-and-consumption choices, it is shown that a permanent rise in foreign aid reduces long-run capital accumulation and labor supply, increases long-run consumption, and has no effect on long-run foreign borrowing.

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Bibliographic Info

Paper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 56.

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Date of creation: 2001
Date of revision:
Publication status: Published in Review of Development Economics, Volume 5, Issue 1, pages 105┬ĘC118, February 2001
Handle: RePEc:cuf:wpaper:56

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Web page: http://cema.cufe.edu.cn/
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Cited by:
  1. Limodio, Nicola, 2011. "The impact of pro-vulnerable income transfers : Leisure, dependency and a distribution hypothesis," Policy Research Working Paper Series 5881, The World Bank.
  2. Wenli Cheng & Dingsheng Zhang & Heng-Fu Zou, 2006. "THE EFFECTS OF FOREIGN AID ON THE CREATION AND DISTRIBUTION OF WEALTH Wenli Cheng, Dingsheng Zhang and Heng-Fu Zou," Development Research Unit Working Paper Series 10/06, Monash University, Department of Economics.
  3. Xuan Changyong & Sun Jun & Yan Chen, 2012. "Foreign debt, economic growth and economic crisis," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 5(2), pages 157-167, June.
  4. Liutang Gong & Heng-fu Zou, 1999. "Foreign Aid Reduces Domestic Capital Accumulation and Increases Foreign Borrowing: A Theoretical Analysis," CEMA Working Papers 8, China Economics and Management Academy, Central University of Finance and Economics, revised Apr 2000.
  5. James, Ang, 2009. "Financial Liberalization and the Aid-Growth Relationship in India," MPRA Paper 14411, University Library of Munich, Germany.
  6. Cui, Xiaoyong & Gong, Liutang, 2008. "Foreign aid, domestic capital accumulation, and foreign borrowing," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1269-1284, September.
  7. Xayavong, Vilaphonh & Gounder, Rukmani & Obben, James, 2005. "Theoretical Analysis Of Foreign Aid, Policies And State Institutions," Discussion Papers 23704, Massey University, Department of Applied and International Economics.
  8. Wenli Cheng & Dingsheng Zhang & Heng-fu Zou, 2008. "The Effects of Foreign Aid on the Creation and Distribution of Wealth," Annals of Economics and Finance, Society for AEF, vol. 9(2), pages 223-237, November.
  9. James McHugh & Theodora Kosma & Dimitri G. Demekas, 2002. "The Economics of Post Conflict Aid," IMF Working Papers 02/198, International Monetary Fund.

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