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Aid and Sectoral Labour Productivity

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Author Info
Pablo Selaya
Rainer Thiele

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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: http://www.ifw-members.ifw-kiel.de/publications/aid-and-sectoral-labour-productivity/KWP1468.pdf
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Publisher 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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Related research
Keywords: Foreign aid; sectoral labour productivity; Dutch disease;

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Find related papers by JEL classification:
F35 - International Economics - - International Finance - - - Foreign Aid
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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  1. 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 201, University of Oxford, Department of Economics. [Downloadable!]
    Other versions:
  2. Peter Nunnenkamp & Rainer Thiele, 2006. "Targeting Aid to the Needy and Deserving: Nothing But Promises?," The World Economy, Blackwell Publishing, vol. 29(9), pages 1177-1201, 09. [Downloadable!] (restricted)
  3. 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, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
  4. C-J. Dalgaard & H. Hansen, 2001. "On Aid, Growth and Good Policies," The Journal of Development Studies, Taylor and Francis Journals, vol. 37(6), pages 17-41, August. [Downloadable!] (restricted)
  5. Svensson, Jakob, 2000. "Foreign aid and rent-seeking," Journal of International Economics, Elsevier, vol. 51(2), pages 437-461, August. [Downloadable!] (restricted)
  6. 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 4187, The World Bank. [Downloadable!]
  7. Craig Burnside & David Dollar, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September. [Downloadable!] (restricted)
    Other versions:
  8. Easterly, William & Levine, Ross, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1203-50, November.
    Other versions:
  9. David Roodman, 2007. "The Anarchy of Numbers: Aid, Development, and Cross-Country Empirics," World Bank Economic Review, Oxford University Press, vol. 21(2), pages 255-277, May. [Downloadable!] (restricted)
    Other versions:
  10. Henrik Hansen & Finn Tarp, 2000. "Aid effectiveness disputed," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 375-398.
  11. Josip Tica & Ivo Družić, 2006. "The Harrod-Balassa-Samuelson Effect: A Survey of Empirical Evidence," EFZG Working Papers Series 0607, Faculty of Economics and Business, University of Zagreb. [Downloadable!]
  12. Simon Feeny & Bazoumana Ouattara, 2009. "What type of economic growth does foreign aid support?," Applied Economics Letters, Taylor and Francis Journals, vol. 16(7), pages 727-730. [Downloadable!] (restricted)
  13. William Easterly, 2007. "Was Development Assistance a Mistake?," American Economic Review, American Economic Association, vol. 97(2), pages 328-332, May. [Downloadable!]
  14. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April. [Downloadable!] (restricted)
  15. Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2004. "On The Empirics of Foreign Aid and Growth," Economic Journal, Royal Economic Society, vol. 114(496), pages F191-F216, 06. [Downloadable!] (restricted)
    Other versions:
  16. Jianhuai Shi, 2006. "Are Currency Appreciations Contractionary in China?," NBER Working Papers 12551, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  17. Raghuram G. Rajan & Arvind Subramanian, 2008. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 643-665, 06. [Downloadable!] (restricted)
    Other versions:
  18. Michael Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting Chickens When They Hatch: The Short-term Effect of Aid on Growth," Working Papers 44, Center for Global Development. [Downloadable!]
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  19. Raghuram Rajan & Arvind Subramanian, 2007. "Does Aid Affect Governance?," American Economic Review, American Economic Association, vol. 97(2), pages 322-327, May. [Downloadable!]
  20. Thierry Tressel & Alessandro Prati, 2006. "Aid Volatility and Dutch Disease: Is There a Role for Macroeconomic Policies?," IMF Working Papers 06/145, International Monetary Fund. [Downloadable!]
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