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The Economic Benefits of Giving Aid in Terms of Donors` Exports

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Abstract

This paper uses the gravity model of trade to investigate the link between bilateral and multilateral foreign aid and exports. There are three primary findings from this approach. First, in the long term, the average return, in terms of an increase in the donor’s level of goods exports, is approximately $ 2.15 US for every aid dollar spent on bilateral aid. Second, multilateral aid has a positive effect on export levels only in the short term, whereas in the long term, the effect is negative. Third, aid from other donors does not give rise to a displacement effect for a given donor-recipient trade relationship. This paper also makes comparisons among donors and finds that aid has a positive and significant effect on most donors’ export levels.

Suggested Citation

  • Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann D. & Stephan Klasen, 2010. "The Economic Benefits of Giving Aid in Terms of Donors` Exports," Ibero America Institute for Econ. Research (IAI) Discussion Papers 202, Ibero-America Institute for Economic Research.
    • Handle: RePEc:got:iaidps:202
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    Cited by:

    1. is not listed on IDEAS
    2. Kilolo, Jean-Marc Malambwe, 2013. "Country size, trade liberalization and transfers," MPRA Paper 47996, University Library of Munich, Germany.
    3. José María, Larrú, 2012. "La relación entre la ayuda al desarrollo y la desigualdad. Evidencia y justificación teórica [Aid and inequality relationship. Evidence and theoretical justification]," MPRA Paper 38857, University Library of Munich, Germany.

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    Keywords

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    JEL classification:

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

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