Aid for Trade and Global Growth

    Research output: Contribution to journalArticle


    Aid for trade increases a recipient's public services, which lower its import and export transport costs. Formulating a two-country endogenous growth model, we obtain two main results. First, a permanent increase in the donor's aid/gross domestic product (GDP) ratio raises the steady-state growth rate as well as both countries' long-run fractions and cost shares of imported varieties if and only if it lowers the product of transport costs. Second, under a plausible condition, there exists a unique interior growth-maximizing aid/GDP ratio. These results are robust to alternative specifications for congestion and stock-flow nature of public goods.

    Original languageEnglish
    Pages (from-to)1178-1201
    Number of pages24
    JournalReview of International Economics
    Issue number5
    Publication statusPublished - 2016 Nov 1

    ASJC Scopus subject areas

    • Geography, Planning and Development
    • Development

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