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Aid and Sectoral Labour Productivity

  • Pablo Selaya
  • Rainer Thiele

The paper examines empirically the proposition that aid to poor countries is detrimental for external competitiveness, giving rise to Dutch disease type effects. At the aggregate level, aid is found to have a positive effect on growth of labour productivity. A sectoral decomposition shows that the effect is significant and positive both in the tradables and the nontradables sectors. The paper thus finds no empirical support for the hypothesis that aid reduces external competitiveness in developing countries. Possible reasons are the existence of large idle labour capacity and high levels of dollarization in financial liabilities at the firm level

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File URL: https://www.ifw-members.ifw-kiel.de/publications/aid-and-sectoral-labour-productivity/KWP1468.pdf
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1468.

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Length: 25 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:kie:kieliw:1468
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