IDEAS home Printed from https://ideas.repec.org/a/bla/germec/v10y2009ip317-338.html
   My bibliography  Save this article

Does German Development Aid Promote German Exports?

Author

Listed:
  • 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. Copyright 2009 The Authors. Journal Compilation Verein für Socialpolitik and Blackwell Publishing Ltd.

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, pages 317-338, August.
    • Handle: RePEc:bla:germec:v:10:y:2009:i::p:317-338
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    References listed on IDEAS

    as
    1. Robert K. Fleck & Christopher Kilby, 2006. "World Bank Independence: A Model and Statistical Analysis of US Influence," Review of Development Economics, Wiley Blackwell, vol. 10(2), pages 224-240, May.
    2. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    3. Bhagwati, Jagdish N & Brecher, Richard A & Hatta, Tatsuo, 1983. "The Generalized Theory of Transfers and Welfare: Bilateral Transfers in a Multilateral World," American Economic Review, American Economic Association, vol. 73(4), pages 606-618, September.
    4. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-481, August.
    5. A. Bhargava & L. Franzini & W. Narendranathan, 2006. "Serial Correlation and the Fixed Effects Model," World Scientific Book Chapters, in: Econometrics, Statistics And Computational Approaches In Food And Health Sciences, chapter 4, pages 61-77, World Scientific Publishing Co. Pte. Ltd..
    6. Alesina, Alberto & Dollar, David, 2000. "Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March.
    7. Brecher, Richard A & Bhagwati, Jagdish N, 1981. "Foreign Ownership and the Theory of Trade and Welfare," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 497-511, June.
    8. 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.
    9. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    10. Jean‐Claude Berthélemy, 2006. "Bilateral Donors’ Interest vs. Recipients’ Development Motives in Aid Allocation: Do All Donors Behave the Same?," Review of Development Economics, Wiley Blackwell, vol. 10(2), pages 179-194, May.
    11. Brecher, Richard A. & Bhagwati, Jagdish N., 1982. "Immiserizing transfers from abroad," Journal of International Economics, Elsevier, vol. 13(3-4), pages 353-364, November.
    12. Simone Juhasz Silva & Douglas Nelson, 2012. "Does Aid Cause Trade? Evidence from an Asymmetric Gravity Model," The World Economy, Wiley Blackwell, vol. 35(5), pages 545-577, May.
    13. Slobodan Djajić & Sajal Lahiri & Pascalis Raimondos‐Møller, 2004. "Logic of Aid in an Intertemporal Setting," Review of International Economics, Wiley Blackwell, vol. 12(1), pages 151-161, February.
    14. World Bank, 2007. "World Development Indicators 2007," World Bank Publications - Books, The World Bank Group, number 8150, December.
    15. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April.
    16. Berthelemy, Jean-Claude & Tichit, Ariane, 2004. "Bilateral donors' aid allocation decisions--a three-dimensional panel analysis," International Review of Economics & Finance, Elsevier, vol. 13(3), pages 253-274.
    17. Oliver Morrissey, 2006. "Aid or Trade, or Aid and Trade?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 39(1), pages 78-88, March.
    18. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    19. Mak Arvin & Bruce Cater & Saud Choudhry, 2000. "A causality analysis of untied foreign assistance and export performance: the case of Germany," Applied Economics Letters, Taylor & Francis Journals, vol. 7(5), pages 315-319.
    20. Jagdish Bhagwati & Richard Brecher & Tatsuo Hatta, 1984. "The paradoxes of immiserizing growth and donor-enriching “recipient-immiserizing” transfers: A tale of two literatures," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 120(2), pages 228-243, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Martínez-Zarzoso Inmaculada & Klasen Stephan & Nowak-Lehmann D. Felicitas & Larch Mario, 2009. "Does German Development Aid Promote German Exports?," German Economic Review, De Gruyter, vol. 10(3), pages 317-338, August.
    2. Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann D. & Stephan Klasen & Florian Johannsen, 2013. "Does German Development Aid Promote German Exports and German Employment? A Sectoral-Level Analysis," Ibero America Institute for Econ. Research (IAI) Discussion Papers 227, Ibero-America Institute for Economic Research, revised 18 Dec 2013.
    3. Martínez-Zarzoso Inmaculada & Nowak-Lehmann Felicitas & Klasen Stephan & Johannsen Florian, 2016. "Does German Development Aid boost German Exports and German Employment? A Sectoral Level Analysis," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 236(1), pages 71-94, February.
    4. Liu, Ailan & Tang, Bo, 2018. "US and China aid to Africa: Impact on the donor-recipient trade relations," China Economic Review, Elsevier, vol. 48(C), pages 46-65.
    5. Manders, Ton & Veenendaal, Paul, 2008. "Border tax adjustments and the EU-ETS - A quantitative assessment," Conference papers 331812, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann & M. D. Parra & Stephan Klasen, 2014. "Does Aid Promote Donor Exports? Commercial Interest versus Instrumental Philanthropy," Kyklos, Wiley Blackwell, vol. 67(4), pages 559-587, November.
    7. Barthel, Fabian & Neumayer, Eric & Nunnenkamp, Peter & Selaya, Pablo, 2014. "Competition for Export Markets and the Allocation of Foreign Aid: The Role of Spatial Dependence among Donor Countries," World Development, Elsevier, vol. 64(C), pages 350-365.
    8. Minoiu, Camelia & Reddy, Sanjay G., 2010. "Development aid and economic growth: A positive long-run relation," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(1), pages 27-39, February.
    9. Philipp H�hne & Birgit Meyer & Peter Nunnenkamp, 2014. "Who Benefits from Aid for Trade? Comparing the Effects on Recipient versus Donor Exports," Journal of Development Studies, Taylor & Francis Journals, vol. 50(9), pages 1275-1288, September.
    10. Inma Martínez-Zarzoso & F. D. Nowak-Lehmann & S. Klasen, 2017. "Aid and Its Impact on the Donor’s Export Industry: The Dutch Case," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 29(4), pages 769-786, August.
    11. 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.
    12. Rainer Thiele & Peter Nunnenkamp & Axel Dreher, 2007. "Do Donors Target Aid in Line with the Millennium Development Goals? A Sector Perspective of Aid Allocation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 143(4), pages 596-630, December.
    13. Montes-Rojas, Gabriel V., 2013. "Can Poor Countries Lobby for More US Bilateral Aid?," World Development, Elsevier, vol. 44(C), pages 77-87.
    14. 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 191-216, June.
    15. Akiko Suwa-Eisenmann & Thierry Verdier, 2007. "Aid and trade," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 23(3), pages 481-507, Autumn.
    16. Abbas, Syed Ali & Selvanathan, Eliyathamby A. & Selvanathan, Saroja & Bandaralage, Jayatilleke S., 2021. "Are remittances and foreign aid interlinked? Evidence from least developed and developing countries," Economic Modelling, Elsevier, vol. 94(C), pages 265-275.
    17. Stubbs, Thomas H. & Kentikelenis, Alexander E. & King, Lawrence P., 2016. "Catalyzing Aid? The IMF and Donor Behavior in Aid Allocation," World Development, Elsevier, vol. 78(C), pages 511-528.
    18. Inmaculada Martinez-Zarzoso, 2019. "Effects of Foreign Aid on Income through International Trade," Politics and Governance, Cogitatio Press, vol. 7(2), pages 29-52.
    19. Sèna Kimm Gnangnon, 2016. "Market Access of OECD Donor Countries and Their Supply of Aid for Trade," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 1-38, February.
    20. Sèna Kimm Gnangnon, 2020. "Trade Openness and Diversification of External Financial Flows for Development: An Empirical Analysis," South Asian Journal of Macroeconomics and Public Finance, , vol. 9(1), pages 22-57, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:germec:v:10:y:2009:i::p:317-338. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley-Blackwell Digital Licensing or Christopher F. Baum (email available below). General contact details of provider: https://edirc.repec.org/data/vfsocea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.