Aid for trade, infrastructure, and the growth effects of trade reform: issues and implications for Caribbean countries

Emmanuel Pinto Moreira

No 5265, Policy Research Working Paper Series from The World Bank

Abstract: This paper examines how aid-for-trade programs can help to magnify the growth benefits that developing countries can reap from trade reform and global integration, with a special emphasis on the Caribbean region. The first part discusses various rationales for trade-related aid, viewed both as a compensatory scheme (aimed at cushioning the impact of revenue cuts and adjustment costs) and a promotion scheme (aimed at alleviating supply-side constraints). In the latter case, particular attention is paid to the role of infrastructure as a constraining factor on trade expansion. The second part discusses the relevance of aid-for-trade arguments for Caribbean countries and identifies a number of specific issues for the region. The third part illustrates the potential growth effects of aid-for-trade programs with simulation results for the Dominican Republic -- a country where infrastructure indicators remain relatively weak. The results illustrate the potentially large growth benefits that a temporary and well-targeted aid-for-trade program can provide to countries of the region.

Keywords: Environmental Economics&Policies; Economic Theory&Research; Emerging Markets; Free Trade; Debt Markets (search for similar items in EconPapers)
Date: 2010-04-01
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