EconPapers    
Economics at your fingertips  
 

On the Growth Implications of Foreign Aid for Public Investment Co‐Financing

Pantelis Kalaitzidakis and Sarantis Kalyvitis ()

Review of Development Economics, 2008, vol. 12, issue 2, 354-371

Abstract: In this paper we present an endogenous growth model with foreign transfers for public capital formation in order to analyze the implications for growth maximization when the public sector in recipient countries co‐finances investment projects. Our main innovation is to show that, first, there is a unique growth‐maximizing absorption rate of funds that decreases with the co‐financing ratio and, second, that high amounts of assistance may be an impediment to growth due to the excess domestic taxation required to co‐finance investment projects. We then derive a policy rule for designing the growth‐maximizing co‐financing share under a given level of assistance. Finally, we also highlight some implications for EU regional policies, which aim at fostering growth in poorer EU countries by co‐financing public capital formation.

Date: 2008
References: View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1111/j.1467-9361.2007.00385.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:rdevec:v:12:y:2008:i:2:p:354-371

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1363-6669

Access Statistics for this article

Review of Development Economics is currently edited by E. Kwan Choi

More articles in Review of Development Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2019-08-08
Handle: RePEc:bla:rdevec:v:12:y:2008:i:2:p:354-371