Structural Change in Transition Economies: Does Foreign Aid Matter?
AbstractThis paper addresses whether the initial declines in the manufacturing and real wages in transition economies were anything unexpected to justify policy reversal, and whether the "often-recommended" foreign aid would have helped them curb these declines in any significant way. It answers these questions with the help of a two-sector three-factor small open economy model and simulation exercises. It concludes that, given the relative price distortions and the market disequilibria that transition economies inherited from their planning era, the initial declines in their manufacturing and real wages are to be mostly expected. Foreign aid, whose impact is noticeable only when it is in excess of 5% of GDP, does not curb the decline in their real wages in any measurable way and exacerbates the decline in their manufacturing by a few percent.
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Bibliographic InfoPaper provided by Yale University, Department of Economics in its series Working Papers with number 76.
Date of creation: Dec 2009
Date of revision:
Find related papers by JEL classification:
- R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-06-04 (All new papers)
- NEP-DEV-2010-06-04 (Development)
- NEP-TRA-2010-06-04 (Transition Economics)
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