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The Economics of Post Conflict Aid


  • James McHugh
  • Theodora Kosma
  • Dimitri G Demekas


Post conflict aid is different from conventional development aid and has different effects on the recipient economy. The paper builds a theoretical model tailored around the main stylized facts of post conflict aid and traces the impact of different kinds of post-conflict aid on capital accumulation, growth, welfare, and resource allocation. While both humanitarian and reconstruction aid are welfare-enhancing, humanitarian aid reduces long-run capital accumulation and growth. Reconstruction aid, on the other hand, may increase the long-run capital stock and, if carefully designed, avoid the pitfalls of the Dutch disease.

Suggested Citation

  • James McHugh & Theodora Kosma & Dimitri G Demekas, 2002. "The Economics of Post Conflict Aid," IMF Working Papers 02/198, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:02/198

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    References listed on IDEAS

    1. Wijnbergen, Sweder Van, 1986. "Macroeconomic aspects of the effectiveness of foreign aid: On the two-gap model, home goods disequilibrium and real exchange rate misalignment," Journal of International Economics, Elsevier, vol. 21(1-2), pages 123-136, August.
    2. Robert Lensink & Oliver Morrissey, 2000. "Aid instability as a measure of uncertainty and the positive impact of aid on growth," Journal of Development Studies, Taylor & Francis Journals, vol. 36(3), pages 31-49.
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    6. Turnovsky, Stephen J. & Fisher, Walter H., 1995. "The composition of government expenditure and its consequences for macroeconomic performance," Journal of Economic Dynamics and Control, Elsevier, vol. 19(4), pages 747-786, May.
    7. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    8. Peter Hjertholm & Jytte Laursen & Howard White, 2000. "Macroeconomic Issues in Foreign Aid," Discussion Papers 00-05, University of Copenhagen. Department of Economics.
    9. Henrik Hansen & Finn Tarp, 2000. "Aid effectiveness disputed," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 375-398, April.
    10. Gang, Ira N. & Ali Khan, Haider, 1990. "Foreign aid, taxes, and public investment," Journal of Development Economics, Elsevier, vol. 34(1-2), pages 355-369, November.
    11. Fischer, Stanley & Alonso-Gamo, Patricia & Erickson von Allmen, Ulric, 2001. "Economic Developments in the West Bank and Gaza since Oslo," Economic Journal, Royal Economic Society, vol. 111(472), pages 254-275, June.
    12. Krugman, Paul, 1987. "The narrow moving band, the Dutch disease, and the competitive consequences of Mrs. Thatcher : Notes on trade in the presence of dynamic scale economies," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 41-55, October.
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    Cited by:

    1. Michael Bleaney & Arcangelo Dimico, "undated". "The Intensity of Conflict, Growth and Post-Conflict Recovery," Discussion Papers 11/03, University of Nottingham, CREDIT.
    2. repec:unu:wpaper:wp2012-07 is not listed on IDEAS
    3. Nasery, Jawid Ahmad, 2014. "The Economic Shock to Afghanistan Caused by Aid Reduction and Troops Withdrawal," IEE Working Papers 202, Institut fuer Entwicklungsforschung und Entwicklungspolitik, Ruhr-Universitaet Bochum.
    4. Dimico, Arcangelo, 2013. "The Evolution of Conflict and Effectiveness of Aid," MPRA Paper 47050, University Library of Munich, Germany.


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