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A Dynamic Analysis of Tied Aid

Author

Listed:
  • Bharat R. Hazari

    (Chercheur indépendant)

  • Jean-Pierre Laffargue

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Chi-Chur Chao

    (CUHK - The Chinese University of Hong Kong [Hong Kong])

  • Eden S. H. Yu

    (CUHK - City University of Hong Kong [Hong Kong])

Abstract

In this paper we examine the impact of tied aid on capital accumulation and welfare in the presence of a quota on imports. Using a simulation model we establish that tied aid can lower the relative domestic price of the manufactured good and therefore reduce the stock of capital. In the presence of a strong production externality from capital accumulation and high tying ratio, tied aid may immiserize the recipient country.

Suggested Citation

  • Bharat R. Hazari & Jean-Pierre Laffargue & Chi-Chur Chao & Eden S. H. Yu, 2007. "A Dynamic Analysis of Tied Aid," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00270896, HAL.
    • Handle: RePEc:hal:cesptp:halshs-00270896
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00270896
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    References listed on IDEAS

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    Keywords

    Tied aid; Quotas; Capital; Welfare;
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