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Logic of Aid in an Intertemporal Setting

Author

Listed:
  • Slobodan Djajic
  • Sajal Lahiri
  • Pascalis Raimondos-Møller

Abstract

This paper studies the welfare implications of temporary foreign aid in the context of a simple two-country model of trade. In addition to its usual effects, a transfer of income in one period is assumed to influence the pattern of consumption of the recipient country in the following period. The implied change in the terms of trade is consistent with a number of possible outcomes with respect to the intertemporal welfare of the donor, the recipient, and the world as a whole. Particular attention is devoted to the conditions for strict Pareto improvement, the only case consistent with the presumption that the acts of giving and receiving aid are voluntary.

Suggested Citation

  • Slobodan Djajic & Sajal Lahiri & Pascalis Raimondos-Møller, "undated". "Logic of Aid in an Intertemporal Setting," EPRU Working Paper Series 96-21, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:epruwp:96-21
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    1. is not listed on IDEAS
    2. repec:bla:germec:v:10:y:2009:i::p:317-338 is not listed on IDEAS
    3. Martínez-Zarzoso Inmaculada & Nowak-Lehmann Felicitas & Klasen Stephan & Johannsen Florian, 2016. "Does German Development Aid boost German Exports and German Employment? A Sectoral Level Analysis," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 236(1), pages 71-94, February.
    4. Akira Yakita, 2009. "Technology Choice And Environmental Awareness In A Trade And Environment Context," Australian Economic Papers, Wiley Blackwell, vol. 48(3), pages 270-279, September.
    5. Hendrik W. Kruse & Inmaculada Martínez‐Zarzoso, 2021. "Transfers in the gravity equation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(1), pages 410-442, February.
    6. Emmanuelle Lavallée & Julie Lochard, 2022. "International trade and face-to-face diplomacy," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 158(4), pages 987-1010, November.
    7. 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.
    8. Noh, Bobae & Heshmati, Almas, 2017. "Does Official Development Assistance Affect Donor's Export? Case of Korea," IZA Discussion Papers 10553, Institute of Labor Economics (IZA).
    9. Dufková Gabriela & Šálek Pavel, 2022. "Effects of Development Aid on Donor’s Exports: A Case of the Czech Republic," Review of Economic Perspectives, Sciendo, vol. 22(3), pages 171-191, September.
    10. Barthel, Fabian & Neumayer, Eric & Nunnenkamp, Peter & Selaya, Pablo, 2014. "Competition for Export Markets and the Allocation of Foreign Aid: The Role of Spatial Dependence among Donor Countries," World Development, Elsevier, vol. 64(C), pages 350-365.
    11. Slobodan Djajić, 2008. "Foreign Aid, Infrastructure Development, and Welfare: An Intertemporal Analysis," WIDER Working Paper Series RP2008-64, World Institute for Development Economic Research (UNU-WIDER).
    12. Hendrik KRUSE & Thais NUNEZ-ROCHA & Camélia TURCU, 2019. "Infrastructure aid for resource trade? The crossroads of strategy and sustainable development," LEO Working Papers / DR LEO 2728, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    13. Camelia Turcu & Yunzhi Zhang, 2019. "Does one good deserve another? Evidence from China’s trade and aid policy," Working Papers 2019.02, International Network for Economic Research - INFER.
    14. Shwe Sin Oo & Masaru Ichihashi, 2015. "How Does Aid For Trade Contribute To ASEAN`s Trading?," IDEC DP2 Series 5-2, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).
    15. Philipp H�hne & Birgit Meyer & Peter Nunnenkamp, 2014. "Who Benefits from Aid for Trade? Comparing the Effects on Recipient versus Donor Exports," Journal of Development Studies, Taylor & Francis Journals, vol. 50(9), pages 1275-1288, September.
    16. Camélia TURCU & Yunzhi ZHANG, 2020. "How Does Development Aid Impact Trade Performance and Margins? Evidence from China," LEO Working Papers / DR LEO 2847, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    17. Jan Fałkowski, 2018. "U.S. food aid and American exports to recipient countries during the Cold War," Agricultural Economics, International Association of Agricultural Economists, vol. 49(5), pages 659-668, September.
    18. Sèna Kimm Gnangnon, 2016. "Market Access of OECD Donor Countries and Their Supply of Aid for Trade," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 1-38, February.
    19. Martínez-Zarzoso Inmaculada & Klasen Stephan & Nowak-Lehmann D. Felicitas & Larch Mario, 2009. "Does German Development Aid Promote German Exports?," German Economic Review, De Gruyter, vol. 10(3), pages 317-338, August.
    20. Felicitas Nowak-Lehmann D. & Inmaculada Mart�nez-Zarzoso & Stephan Klasen & Dierk Herzer, 2009. "Aid and Trade - A Donor's Perspective," Journal of Development Studies, Taylor & Francis Journals, vol. 45(7), pages 1184-1202, August.
    21. Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann & M. D. Parra & Stephan Klasen, 2014. "Does Aid Promote Donor Exports? Commercial Interest versus Instrumental Philanthropy," Kyklos, Wiley Blackwell, vol. 67(4), pages 559-587, November.

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