IDEAS home Printed from https://ideas.repec.org/p/got/iaidps/206.html
   My bibliography  Save this paper

Foreign Aid and Recipient Countries` Exports: Does Aid Promote Bilateral Trade?

Author

Listed:

Abstract

This paper uses the gravity model of trade to investigate the link between foreign aid and exports in recipient countries. Most of the theoretical work emphasizes the negative impact of aid on recipient countries’ exports primarily due to exchange rate appreciation, disregarding possible positive effects of aid in promoting bilateral trade relations. The empirical findings, in contrast, indicate that the net impact of aid on recipient countries’ exports is positive -even though the macroeconomic impact of aid is rather small- and that the average return for recipients’ exports is about 1.50 US$ for every aid dollar spent. We argue that “bilateral aid” seems to promote good bilateral trade relations, mutual trust and familiarity and that those factors reinforce bilateral trade, including recipient country exports. The paper also estimates the effect of different types of aid (bilateral aid versus multilateral aid flowing to a specific recipient) and studies aid’s contribution to an expansion of exports in different regions of the world. It is found that aid is strongly export-enhancing in Asia and Latin America, but not in Africa.

Suggested Citation

  • Felicitas Nowak-Lehmann D. & Inmaculada Martinez-Zarzoso & Adriana Cardozo & Dierk Herzer & Stephan Klasen, 2010. "Foreign Aid and Recipient Countries` Exports: Does Aid Promote Bilateral Trade?," Ibero America Institute for Econ. Research (IAI) Discussion Papers 206, Ibero-America Institute for Economic Research.
  • Handle: RePEc:got:iaidps:206
    as

    Download full text from publisher

    File URL: http://www2.vwl.wiso.uni-goettingen.de/ibero/working_paper_neu/DB206.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Felicitas Nowak-Lehmann D. & Inmaculada Martínez-Zarzoso & Dierk Herzer & Stephan Klasen & Axel Dreher, 2009. "In Search for a Long-run Relationship between Aid and Growth: Pitfalls and Findings," Ibero America Institute for Econ. Research (IAI) Discussion Papers 196, Ibero-America Institute for Economic Research.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:dug:journl:y:2017:i:2:p:169-178 is not listed on IDEAS
    2. Wim Naudé, 2011. "Foreign Aid for Innovation: The Missing Ingredient in Private Sector Development?," Working Papers 2011/35, Maastricht School of Management.
    3. repec:eee:chieco:v:48:y:2018:i:c:p:46-65 is not listed on IDEAS
    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.

    More about this item

    Keywords

    International trade; foreign aid; recipient exports; bilateral trade relations;

    JEL classification:

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

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:got:iaidps:206. 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: (Sabine Jaep). General contact details of provider: http://edirc.repec.org/data/ibgoede.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.