Aid, non-traded goods, and growth

Research output: Contribution to journalArticle

Abstract

Abstract. We examine the effects of foreign aid in a small recipient country with two traded goods, one non-traded good, and two factors. Learning by doing and intersectoral knowledge spillovers contribute to endogenous growth. We obtain two main results. First, a permanent increase in untied aid raises (or lowers) the growth rate if and only if the non-traded good is more capital intensive (or effective labour intensive) than the operating traded good. Second, a permanent increase in untied aid raises welfare if the non-traded good is more capital intensive than the operating traded good; otherwise, it may raise or lower welfare.

Original languageEnglish
Pages (from-to)423-439
Number of pages17
JournalCanadian Journal of Economics
Volume43
Issue number2
DOIs
Publication statusPublished - 2010 May 1
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics

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