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Multiple equilibria arising from donor’s aid policy in economic development

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  • Kitaura, Koji
  • Ogawa, Hikaru
  • Yakita, Sayaka

Abstract

This paper presents a neoclassical growth model comprising education and child labor with a focus on developing and aid-receiving countries to demonstrate cyclical growth and bifurcation in economic development. The appearance of multiple equilibria has often been attributed to the internal affairs of recipient countries, such as technology in production, subsistence minimum in consumption, and liquidity constraints in investment. The main argument of this paper is that the aid allocation policy employed by donor countries, thereby the motive of aid-providers, leads to divaricated and cyclical development in the recipient countries.

Suggested Citation

  • Kitaura, Koji & Ogawa, Hikaru & Yakita, Sayaka, 2011. "Multiple equilibria arising from donor’s aid policy in economic development," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 819-827.
  • Handle: RePEc:eee:jmacro:v:33:y:2011:i:4:p:819-827
    DOI: 10.1016/j.jmacro.2011.09.003
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    References listed on IDEAS

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    More about this item

    Keywords

    Aid allocation; Fungibility; Multiple equilibria; Cyclical growth; Economic development;

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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