Aid for trade and welfare

Research output: Contribution to journalArticle

1 Citation (Scopus)

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 languageEnglish
Pages (from-to)216-231
Number of pages16
JournalJapanese Economic Review
Volume63
Issue number2
DOIs
Publication statusPublished - 2012 Jun 1

ASJC Scopus subject areas

  • Economics and Econometrics

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