Foreign Aid: Where Your Money Could Be ? An Optimal Two-Sector Growth Model Out Lining a Simple Answer

Raul Fuentes
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Raul Fuentes: UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)

No 2004003, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: In this paper, we present an optimal two-sector growth model involving foreign aid as an input into the production function. We characterize the optimal resources allocation across sectors. Once calibrated, mainly, on Latin America, countries, the model exhibits weak substitutability between aid and capital stock. Nonetheless, using numerical simulations, the model reproduces the main stylized facts outlined in the literature.

Keywords: Foreign Aid; Economic Development; Investment; Economic Growth; Quantitative Approach (search for similar items in EconPapers)
JEL-codes: E13 O1 O11 O21 O4 O41 (search for similar items in EconPapers)
Pages: 23
Date: 2003-12-01
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:2004003

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