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Does German Development Aid Promote German Exports?

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  • Inmaculada Martínez‐Zarzoso
  • Felicitas Nowak‐Lehmann D.
  • Stephan Klasen
  • Mario Larch

Abstract

. This paper uses a static and dynamic gravity model of trade to investigate the link between German development aid and exports from Germany to the recipient countries. The findings indicate that, in the long run, German aid is associated with an increase in exports of goods that is larger than the aid flow, with a point estimate of 140% of the aid given. In addition, the evolution of the estimated coefficients over time shows an effect that is consistently positive but that oscillates over time. Interestingly, after a decrease in the 1990s, the estimated coefficients of the effect of aid on trade show a steady increase in the period between 2001 and 2005. The paper distinguishes among recipient countries and finds that the return on aid measured by German exports is higher for aid to countries considered ‘strategic aid recipients’ by the German government. We also find some evidence that aid given by other EU members reduces German exports.

Suggested Citation

  • Inmaculada Martínez‐Zarzoso & Felicitas Nowak‐Lehmann D. & Stephan Klasen & Mario Larch, 2009. "Does German Development Aid Promote German Exports?," German Economic Review, Verein für Socialpolitik, vol. 10(3), pages 317-338, August.
  • Handle: RePEc:bla:germec:v:10:y:2009:i:3:p:317-338
    DOI: 10.1111/j.1468-0475.2008.00458.x
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    File URL: https://doi.org/10.1111/j.1468-0475.2008.00458.x
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Kruse, Hendrik W. & Martínez-Zarzoso, Inma, 2016. "Transfers in the gravity equation: The case of foreign aid," Center for European, Governance and Economic Development Research Discussion Papers 288, University of Goettingen, Department of Economics.
    2. Léopold BIARDEAU, 2017. "L’impact de l’aide au développement sur les flux commerciaux entre pays donateurs et pays récipiendaires," Working Paper 464d860e-562e-4ae7-98f5-1, Agence française de développement.
    3. Konstantin M. Wacker, 2011. "Do multinationals beat down developing countries' export prices? The impact of FDI on net barter terms of trade," Ibero America Institute for Econ. Research (IAI) Discussion Papers 211, Ibero-America Institute for Economic Research.
    4. Badi H. Baltagi & Peter Egger & Michael Pfaffermayr, 2014. "Panel Data Gravity Models of International Trade," CESifo Working Paper Series 4616, CESifo.
    5. Dreher, Axel & Fuchs, Andreas & Langlotz, Sarah, 2019. "The effects of foreign aid on refugee flows," European Economic Review, Elsevier, vol. 112(C), pages 127-147.
    6. Felicitas Nowak-Lehmann D. & Inmaculada Mart�nez-Zarzoso & Stephan Klasen & Dierk Herzer, 2009. "Aid and Trade - A Donor's Perspective," Journal of Development Studies, Taylor & Francis Journals, vol. 45(7), pages 1184-1202, August.
    7. Oxana Babecká Kucharčuková & Jan Babecký & Martin Raiser, 2012. "Gravity Approach for Modelling International Trade in South-Eastern Europe and the Commonwealth of Independent States: The Role of Geography, Policy and Institutions," Open Economies Review, Springer, vol. 23(2), pages 277-301, April.
    8. Macias, Jose Brambila & Massa, Isabella & Salois, Matthew J., 2010. "The Impact of Financial Crises on Trade Flows: A Developing Country Perspective," 84th Annual Conference, March 29-31, 2010, Edinburgh, Scotland 91831, Agricultural Economics Society.
    9. Fuchs, Andreas & Müller, Angelika, 2018. "Democracy and aid donorship," Kiel Working Papers 2113, Kiel Institute for the World Economy (IfW).

    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F35 - International Economics - - International Finance - - - Foreign Aid

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