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A Dynamic Analysis of Tied Aid

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Author Info

  • Bharat R. Hazari

    (Chercheur Indépendant - Aucune)

  • Jean-Pierre Laffargue

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

  • Chi-Chur Chao

    ()
    (The Chinese University of Hong Kong - The Chinese University of Hong Kong)

  • Eden S. H. Yu

    (City University of Hong Kong - City University of 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.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00270896.

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Date of creation: 2007
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Publication status: Published, Theory and Practice of Foreign Aid, Elsevier, Amsterdam (Ed.), 2007, 173-183
Handle: RePEc:hal:cesptp:halshs-00270896

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00270896
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Related research

Keywords: Tied aid; Quotas; Capital; Welfare;

References

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  1. Yano, M. & Nugent, J.B. & Lay, R.N., 1995. "Aid, Non-Traded Goods and the Transfer Paradox in Small Countries," Papers, Southern California - Department of Economics 9515, Southern California - Department of Economics.
  2. Lahiri, Sajal & Raimondos, Pascalis, 1995. "Welfare effects of aid under quantitative trade restrictions," Journal of International Economics, Elsevier, Elsevier, vol. 39(3-4), pages 297-315, November.
  3. Jai-Young Choi & Eden S. H. Yu, 1987. "Immiserizing Transfer under Variable Returns to Scale," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 20(3), pages 634-45, August.
  4. Bhagwati, Jagdish N & Srinivasan, T N, 1980. "Revenue Seeking: A Generalization of the Theory of Tariffs," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 88(6), pages 1069-87, December.
  5. Brecher, Richard A, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 88(1), pages 98-116, February.
  6. Schweinberger, A G, 1990. "On the Welfare Effects of Tied Aid," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 457-62, May.
  7. Martin, Ricardo, 1977. "Immiserizing growth for a tariff-distorted, small economy : Further analysis," Journal of International Economics, Elsevier, Elsevier, vol. 7(4), pages 323-328, November.
  8. Chi-Chur Chao & Eden S. H. Yu, 2001. "Import quotas, tied aid, capital accumulation, and welfare," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 34(3), pages 661-676, August.
  9. Kemp, Murray C & Kojima, Shoichi, 1985. "Tied Aid and the Paradoxes of Donor-Enrichment and Recipient-Impoverishment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 721-29, October.
  10. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  11. Bhagwati, Jagdish N & Brecher, Richard A & Hatta, Tatsuo, 1983. "The Generalized Theory of Transfers and Welfare: Bilateral Transfers in a Multilateral World," American Economic Review, American Economic Association, American Economic Association, vol. 73(4), pages 606-18, September.
  12. Bhagwati, Jagdish N & Brecher, Richard A & Hatta, Tatsuo, 1985. "The Generalized Theory of Transfers and Welfare: Exogenous (Policy-imposed) and Endogenous (Transfer-induced) Distortions," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(3), pages 697-714, August.
  13. Liu, Wen-Fang & Turnovsky, Stephen J., 2005. "Consumption externalities, production externalities, and long-run macroeconomic efficiency," Journal of Public Economics, Elsevier, Elsevier, vol. 89(5-6), pages 1097-1129, June.
  14. Hamid Beladi, 1990. "Unemployment and immiserizing transfer," Journal of Economics, Springer, Springer, vol. 52(3), pages 253-265, October.
  15. Jones, Ronald W, 1985. "Income Effects and Paradoxes in the Theory of International Trade," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 95(378), pages 330-44, June.
  16. Falvey, Rodney E., 1988. "Tariffs, quotas and piecemeal policy reform," Journal of International Economics, Elsevier, Elsevier, vol. 25(1-2), pages 177-183, August.
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