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Does German Development Aid Promote German Exports and German Employment? A Sectoral-Level Analysis

This paper uses an augmented sectoral gravity model of trade to investigate the link between German development aid and exports from Germany to the aid recipient countries. The findings indicate that in the long run each dollar of German aid is associated with an average increase of US$ 0.83 of German exports of goods. The effect varies by sector and the sectors that gain the most are machinery, electrical equipment and transport equipment. By using German input-output tables and according to our estimates, the aid-induced gains in exports generate a total employment effect of about 164,000 jobs of which 66,000 jobs are created in machinery, 26,000 in transport equipment, 24,000 in electrical equipment, 23,500 in basic metals and 18,000 in food, beverages and tobacco. The paper distinguishes among recipient countries and finds that the return on aid measured by German exports is higher for aid to countries considered as partner countries by the German Ministry for Economic Cooperation and Development (BMZ countries).

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File URL: http://www2.vwl.wiso.uni-goettingen.de/ibero/working_paper_neu/DB227.pdf
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Paper provided by Ibero-America Institute for Economic Research in its series Ibero America Institute for Econ. Research (IAI) Discussion Papers with number 227.

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Length: 26 pages
Date of creation: 20 Sep 2013
Date of revision: 18 Dec 2013
Handle: RePEc:got:iaidps:227
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  16. Berthelemy, Jean-Claude & Tichit, Ariane, 2004. "Bilateral donors' aid allocation decisions--a three-dimensional panel analysis," International Review of Economics & Finance, Elsevier, vol. 13(3), pages 253-274.
  17. Nelson C. Mark & Donggyu Sul, 2003. "Cointegration Vector Estimation by Panel DOLS and Long-run Money Demand," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(5), pages 655-680, December.
  18. De Sousa, Jose, 2011. "The currency union effect on trade is decreasing over time," MPRA Paper 35448, University Library of Munich, Germany.
  19. Easterly, William & Williamson, Claudia R., 2011. "Rhetoric versus reality: the best and worst of aid agency practices," MPRA Paper 39139, University Library of Munich, Germany.
  20. Mosley, Paul & Hudson, John & Horrell, Sara, 1987. "Aid, the Public Sector and the Market in Less Developed Countries," Economic Journal, Royal Economic Society, vol. 97(387), pages 616-41, September.
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  22. Hristos Doucouliagos & Martin Paldam, 2005. "Aid Effectiveness on Accumulation. A Meta Study," Economics Working Papers 2005-12, School of Economics and Management, University of Aarhus.
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