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Aid and Sectoral Labour Productivity

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  • Pablo Selaya
  • Rainer Thiele

Abstract

The paper examines empirically the proposition that aid to poor countries is detrimental for external competitiveness, giving rise to Dutch disease type effects. At the aggregate level, aid is found to have a positive effect on growth of labour productivity. A sectoral decomposition shows that the effect is significant and positive both in the tradables and the nontradables sectors. The paper thus finds no empirical support for the hypothesis that aid reduces external competitiveness in developing countries. Possible reasons are the existence of large idle labour capacity and high levels of dollarization in financial liabilities at the firm level

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File URL: https://www.ifw-members.ifw-kiel.de/publications/aid-and-sectoral-labour-productivity/KWP1468.pdf
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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1468.

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Length: 25 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:kie:kieliw:1468

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Keywords: Foreign aid; sectoral labour productivity; Dutch disease;

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References

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  1. Svensson, Jakob, 2000. "Foreign aid and rent-seeking," Journal of International Economics, Elsevier, Elsevier, vol. 51(2), pages 437-461, August.
  2. Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2001. "On the Empirics of Foreign Aid and Growth," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 03-13, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Sep 2003.
  3. Raghuram Rajan & Arvind Subramanian, 2007. "Does Aid Affect Governance?," American Economic Review, American Economic Association, American Economic Association, vol. 97(2), pages 322-327, May.
  4. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers, Economics Group, Nuffield College, University of Oxford 104, Economics Group, Nuffield College, University of Oxford.
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  7. Christopher Adam & David Bevan, 2004. "Aid and the Supply Side: Public Investment, Export Performance and Dutch Disease in Low Income Countries," Economics Series Working Papers, University of Oxford, Department of Economics 201, University of Oxford, Department of Economics.
  8. Simon Feeny & Bazoumana Ouattara, 2009. "What type of economic growth does foreign aid support?," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 16(7), pages 727-730.
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  11. Easterly, William & Levine, Ross, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(4), pages 1203-50, November.
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  17. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  18. Elbadawi, Ibrahim A. & Kaltani, Linda & Schmidt-Hebbel, Klaus, 2007. "Post-conflict aid, real exchange rate adjustment, and catch-up growth," Policy Research Working Paper Series, The World Bank 4187, The World Bank.
  19. Peter Nunnenkamp & Gustavo Canavire & Luis Triveño, 2004. "Targeting Aid to the Needy and Deserving: Nothing But Promises?," Kiel Working Papers, Kiel Institute for the World Economy 1229, Kiel Institute for the World Economy.
  20. Jianhuai Shi, 2006. "Are Currency Appreciations Contractionary in China?," NBER Working Papers 12551, National Bureau of Economic Research, Inc.
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