This paper surveys aspects of the empirical and theoretical debate over the effects of foreign resource inflows on the national saving, investment, and growth of developing countries. The paper suggests a methodology for systematically studying the effects of resource inflows, based on standard optimal growth models modified for consistency with key empirical macro relations. A fairly robust normative implication even of representative-agent optimal consumption models is that much if not most of extra permanent resources should be consumed rather than invested.
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Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2001.
"On the Empirics of Foreign Aid and Growth,"
EPRU Working Paper Series
03-13, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Sep 2003.
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