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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.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/198.

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Length: 36
Date of creation: 01 Nov 2002
Date of revision:
Handle: RePEc:imf:imfwpa:02/198
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  1. 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 F254-75, June.
  2. Peter Hjertholm & Jytte Laursen & Howard White, 2000. "Macroeconomic Issues in Foreign Aid," Discussion Papers 00-05, University of Copenhagen. Department of Economics.
  3. Lensink, Robert & Morrissey, Oliver, 1999. "Aid instability as a measure of uncertainty and the positive impact of aid on growth," CDS Research Reports 199906, University of Groningen, Centre for Development Studies (CDS).
  4. 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.
  5. Burnside, Craig & Dollar, David, 1997. "Aid, policies, and growth," Policy Research Working Paper Series 1777, The World Bank.
  6. Michaely, Michael, 1981. "Foreign aid, economic structure, and dependence," Journal of Development Economics, Elsevier, vol. 9(3), pages 313-330, December.
  7. 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.
  8. 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.
  9. Dollar, David & Easterly, William, 1999. "The search for the key : aid, investment, and policies in Africa," Policy Research Working Paper Series 2070, The World Bank.
  10. 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.
  11. 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.
  12. Henrik Hansen & Finn Tarp, 2000. "Aid effectiveness disputed," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 375-398.
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