Abstract
A new foreign aid initiative called Aid for Trade is intended to improve a recipient's trade-related infrastructure which lowers its trade costs. We formulate a two-country, continuum-good Ricardian model, where each country's transport cost is inversely related to its effective public services which are subject to congestion. Our numerical experiments show that an increase in the donor's aid/GDP ratio within a certain range raises welfare in both countries if the recipient's relative income tax rate is sufficiently small.
| Original language | English |
|---|---|
| Pages (from-to) | 216-231 |
| Number of pages | 16 |
| Journal | Japanese Economic Review |
| Volume | 63 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - 2012 Jun 1 |
ASJC Scopus subject areas
- Economics and Econometrics
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Cite this
Naito, T. (2012). Aid for trade and welfare. Japanese Economic Review, 63(2), 216-231. https://doi.org/10.1111/j.1468-5876.2012.00569.x