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Foreign Aid Reduces Labor Supply and Capital Accumulation

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  • Liutang Gong
  • Heng-fu Zou

Abstract

In an optimal growth model with foreign aid, foreign borrowing, and endogenous leisure-and-consumption choices, it is shown that a permanent rise in foreign aid reduces long-run capital accumulation and labor supply, increases long-run consumption, and has no effect on long-run foreign borrowing.

Suggested Citation

  • Liutang Gong & Heng-fu Zou, 2001. "Foreign Aid Reduces Labor Supply and Capital Accumulation," CEMA Working Papers 56, China Economics and Management Academy, Central University of Finance and Economics.
  • Handle: RePEc:cuf:wpaper:56
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    Cited by:

    1. Raul, FUENTES, 2003. "Foreign Aid : Where Your Money Could Be ? An Optimal Two-Sector Growth Model Out Lining a Simple Answer," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2004003, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    2. Xuan Changyong & Sun Jun & Yan Chen, 2012. "Foreign debt, economic growth and economic crisis," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, vol. 5(2), pages 157-167, June.
    3. Ojiambo Elphas & Jacob Oduor & Mburu Tom & Wawire Nelson, 2015. "Working Paper 226 - Aid Unpredictability and Economic Growth in Kenya," Working Paper Series 2169, African Development Bank.
    4. James B. Ang, 2009. "Financial Liberalization And The Aid Growth Relationship In India," Development Research Unit Working Paper Series 10-09, Monash University, Department of Economics.
    5. Xayavong, Vilaphonh & Gounder, Rukmani & Obben, James, 2005. "Theoretical Analysis Of Foreign Aid, Policies And State Institutions," Discussion Papers 23704, Massey University, Department of Applied and International Economics.
    6. Cui, Xiaoyong & Gong, Liutang, 2008. "Foreign aid, domestic capital accumulation, and foreign borrowing," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1269-1284, September.
    7. Tiwari Aviral Kumar, 2011. "Foreign Aid, FDI, Economic Freedom and Economic Growth in Asian Countries," Global Economy Journal, De Gruyter, vol. 11(3), pages 1-28, September.
    8. James McHugh & Theodora Kosma & Dimitri G Demekas, 2002. "The Economics of Post Conflict Aid," IMF Working Papers 02/198, International Monetary Fund.
    9. Wenli Cheng & Dingsheng Zhang & Heng-Fu Zou, 2006. "THE EFFECTS OF FOREIGN AID ON THE CREATION AND DISTRIBUTION OF WEALTH Wenli Cheng, Dingsheng Zhang and Heng-Fu Zou," Monash Economics Working Papers 10/06, Monash University, Department of Economics.
    10. Liutang Gong & Heng-fu Zou, 2000. "Foreign Aid Reduces Domestic Capital Accumulation and Increases Foreign Borrowing: A Theoretical Analysis," Annals of Economics and Finance, Society for AEF, vol. 1(1), pages 147-163, May.
    11. Puja Guha, 2014. "Economics of Migration and Remittances: A Review Article," Working Papers id:5618, eSocialSciences.
    12. Limodio, Nicola, 2011. "The impact of pro-vulnerable income transfers : Leisure, dependency and a distribution hypothesis," Policy Research Working Paper Series 5881, The World Bank.
    13. Wenli Cheng & Dingsheng Zhang & Heng-fu Zou, 2008. "The Effects of Foreign Aid on the Creation and Distribution of Wealth," Annals of Economics and Finance, Society for AEF, vol. 9(2), pages 223-237, November.
    14. Philip Ifeakachukwu Nwosa & Temidayo Oladiran Akinbobola, 2016. "Capital Inflows and Economic Growth in Nigeria: The Role of Macroeconomic Policies," African Development Review, African Development Bank, vol. 28(3), pages 277-290, September.
    15. James B. Ang, 2010. "Does Foreign Aid Promote Growth? Exploring the Role of Financial Liberalization," Review of Development Economics, Wiley Blackwell, vol. 14(2), pages 197-212, May.

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