Tied Aid Revisited: A Reexamination of the Kemp-Kojima Results in the Presence of Environmental Externalities

Takumi Haibara
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Takumi Haibara: Graduate School of International Cooperation Studies (GSICS); Kobe University, Japan

Indian Economic Review, 2006, vol. 41, issue 2, pages 195-207

Abstract: Tied aid invites a Pareto-improving situation in the presence of environmental externalities. Under certain conditions, although the aid recipient government's marginal propensity to consume the purchased good is lower or higher than the corresponding marginal propensity of the aid recipient individuals, the welfare of both the donor and the recipient improves in the presence of production- or consumption-based pollution. This result counters the conventional wisdom of tied aid presented by Kemp and Kojima (1985).

Keywords: Tied aid; Production-based pollution; Consumption-based pollution; Terms of trade (search for similar items in EconPapers)
JEL-codes: F18 F35 (search for similar items in EconPapers)

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