Aid and the Supply Side: Public Investment, Export Performance, and Dutch Disease in Low-Income Countries
Contemporary policy debates on the macroeconomics of aid often concentrate on short-run Dutch disease effects, ignoring the possible supply-side impact of aid-financed public expenditure. In the simple model of aid and public expenditure presented here, public infrastructure generates an intertemporal productivity spillover, which may exhibit a sector-specific bias. The model also provides for a learning-by-doing externality, through which total factor productivity in the tradable sector is an increasing function of past export volumes. An extended computable version of this model is used to simulate the effect of a step increase in net aid flows. The simulations show that beyond the short run, when conventional demand-side Dutch disease effects are present, the relationship between enhanced aid flows and real exchange rates, output growth, and welfare is less straightforward than simple models of aid suggest. Public infrastructure investment that generates a productivity bias in favor of nontradable production delivers the largest aggregate return to aid, but at the cost of a deterioration in the income distribution. Income gains accrue predominantly to skilled and unskilled urban households, leaving the rural poor relatively worse off. Under plausible parameterizations of the model, the rural poor may also be worse off in absolute terms. Copyright 2006, Oxford University Press.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" 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.
Volume (Year): 20 (2006)
Issue (Month): 2 ()
|Contact details of provider:|| Postal: |
Phone: (202) 477-1234
Fax: 01865 267 985
Web page: http://wber.oxfordjournals.org/
More information through EDIRC
|Order Information:||Web: http://www.oup.co.uk/journals|
When requesting a correction, please mention this item's handle: RePEc:oup:wbecrv:v:20:y:2006:i:2:p:261-290. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.