EconPapers    
Economics at your fingertips  
 

Foreign Aid, Wage Inequality, and Welfare for a Small Open Economy with Tourism

Chi-Chur Chao, Jean‐Pierre Laffargue and Pasquale Sgro ()

Review of International Economics, 2010, vol. 18, issue 3, 454-464

Abstract: While the welfare effect of foreign aid has been extensively analyzed, the impact on the distribution of income has received less attention. At the same time, there has been recent work on tourism where it is complementary to aid in improving welfare. By combining these two strands, this paper concentrates on wage inequality in developing countries. We find that an increase in aid in the form of tied aid can lower the relative price of nontraded goods. The rent extracted from tourists declines, reducing welfare of domestic residents. In addition, the fall in the nontradable price can widen the wage inequality between skilled and unskilled workers. Thus, increased foreign aid may have detrimental effects on national welfare and the distribution of income. Rising wage inequality is confirmed by numerical simulations.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://doi.org/10.1111/j.1467-9396.2010.00906.x

Related works:
Working Paper: Foreign Aid, Wage Inequality and Welfare for a Small Open Economy with Tourism (2010)
Working Paper: Foreign Aid, Wage Inequality and Welfare for a Small Open Economy with Tourism (2010)
Working Paper: Foreign Aid, Wage Inequality and Welfare for a Small Open Economy with Tourism (2010)
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:reviec:v:18:y:2010:i:3:p:454-464

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0965-7576

Access Statistics for this article

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

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

 
Page updated 2025-03-31
Handle: RePEc:bla:reviec:v:18:y:2010:i:3:p:454-464