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Aid to the services sector : does it affect manufacturing exports ?

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  • Ferro, Esteban
  • Portugal-Perez, Alberto
  • Wilson, John S.

Abstract

This paper evaluates the impact of foreign aid to five service sectors (transportation, information and communications technologies, energy, banking/financial services, and business services) on exports of downstream manufacturing sectors in developing countries. To address the reverse causality between aid and exports, the analysis relies on an original identification strategy that exploits (i) the variation of aid flows to service sectors, and (ii) the variation of service-intensities across industrial sectors and countries using input-output data. The authors find a positive effect of aid to services, in general, on downstream manufacturing exports of developing countries across regions and income-level groups.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5728.

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Date of creation: 01 Jul 2011
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Handle: RePEc:wbk:wbrwps:5728

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Keywords: Transport Economics Policy&Planning; Development Economics&Aid Effectiveness; Economic Theory&Research; Emerging Markets; E-Business;

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References

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  1. Raghuram G. Rajan & Arvind Subramanian, 2009. "Aid, Dutch Disease, and Manufacturing Growth," Working Papers 196, Center for Global Development.
  2. Helble, Matthias & Mann, Catherine & Wilson, John S., 2009. "Aid for trade facilitation," Policy Research Working Paper Series 5064, The World Bank.
  3. Laura Alfaro & Andrew Charlton, 2007. "Intra-industry foreign direct investment," LSE Research Online Documents on Economics 19690, London School of Economics and Political Science, LSE Library.
  4. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-86, June.
  5. Michael A. Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting chickens when they hatch: The short-term effect of aid on growth," International Finance 0407010, EconWPA.
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  7. William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
  8. Daron Acemoglu & Simon Johnson & Todd Mitton, 2009. "Determinants of Vertical Integration: Financial Development and Contracting Costs," Journal of Finance, American Finance Association, vol. 64(3), pages 1251-1290, 06.
  9. Luis Angeles & Kyriakos C. Neanidis, 2006. "Aid Effectiveness: The Role of the Local Elite," Centre for Growth and Business Cycle Research Discussion Paper Series 80, Economics, The Univeristy of Manchester.
  10. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
  11. SUWA-EISENMANN Akiko & VERDIER Thierry, 2007. "Aid and trade," Research Unit Working Papers 0709, Laboratoire d'Economie Appliquee, INRA.
  12. Paul Brenton & Erik von Uexkull, 2009. "Product specific technical assistance for exports - has it been effective?," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 18(2), pages 235-254.
  13. Raghuram G. Rajan & Arvind Subramanian, 2005. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," NBER Working Papers 11513, National Bureau of Economic Research, Inc.
  14. Glenn Ellison & Edward L. Glaeser & William R. Kerr, 2010. "What Causes Industry Agglomeration? Evidence from Coagglomeration Patterns," American Economic Review, American Economic Association, vol. 100(3), pages 1195-1213, June.
  15. Markus Bruckner, 2011. "On the Simultaneity Problem in the Aid and Growth Debate," School of Economics Working Papers 2011-01, University of Adelaide, School of Economics.
  16. Trefler, Daniel & Zhu, Susan Chun, 2010. "The structure of factor content predictions," Journal of International Economics, Elsevier, vol. 82(2), pages 195-207, November.
  17. Mitton, Todd, 2008. "Institutions and concentration," Journal of Development Economics, Elsevier, vol. 86(2), pages 367-394, June.
  18. Collier, Paul & Dollar, David, 1999. "Aid allocation and poverty reduction," Policy Research Working Paper Series 2041, The World Bank.
  19. 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.
  20. François Bourguignon & Mark Sundberg, 2007. "Aid Effectiveness – Opening the Black Box," American Economic Review, American Economic Association, vol. 97(2), pages 316-321, May.
  21. Calì, Massimiliano & te Velde, Dirk Willem, 2011. "Does Aid for Trade Really Improve Trade Performance?," World Development, Elsevier, vol. 39(5), pages 725-740, May.
  22. Younger, Stephen D., 1992. "Aid and the Dutch disease: Macroeconomic management when everybody loves you," World Development, Elsevier, vol. 20(11), pages 1587-1597, November.
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Cited by:
  1. Jaud, Melise & Cadot, Olivier, 2011. "A second look at the pesticides initiative program : evidence from Senegal," Policy Research Working Paper Series 5635, The World Bank.
  2. Olivier CADOT & Ana FERNANDES & Julien GOURDON & Aaditya MATTOO & Jaime de MELO, 2013. "Evaluating Aid for Trade : A Survey of Recent Studies," Working Papers P75, FERDI.
  3. Portugal-Perez, Alberto & Wilson, John S., 2012. "Export Performance and Trade Facilitation Reform: Hard and Soft Infrastructure," World Development, Elsevier, vol. 40(7), pages 1295-1307.
  4. Felicitas Nowak-Lehmann & Inmaculada Martínez-Zarzoso & Dierk Herzer & Stephan Klasen & Adriana Cardozo, 2013. "Does foreign aid promote recipient exports to donor countries?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 149(3), pages 505-535, September.

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