Aid, spending strategies and productivity effects: A multi-sectoral CGE analysis for Zambia

Volker Clausen and Hannah Schürenberg-Frosch

Economic Modelling, 2012, vol. 29, issue 6, 2254-2268

Abstract: Numerous econometric studies fail to detect a significant and robust relationship between international aid and economic growth in the recipient countries. Dutch Disease effects might be responsible for this result. This paper examines the relation between aid and its effectiveness in a multi-sector multi-household Computable General Equilibrium (CGE)-framework. Given that international transfers to African countries increasingly take the form of general financial support to the government, different spending strategies and their macroeconomic, sectoral and distributional effects are evaluated in a two-stage simulation making a distinction between immediate direct effects and possible long-run effects from increased productivity. The presence of sector-specific factors weakens Dutch Disease effects and shifts the burden of adjustment primarily to other exporting sectors. While the model simulates the effects of additional aid in Zambia it can be used as a blueprint for other African countries.

Keywords: Africa; Zambia; Aid; Applied general equilibrium; Dutch Disease; Productivity; Sector-specific capital (search for similar items in EconPapers)
JEL-codes: F35 O19 O55 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Working Paper: Aid, Spending Strategies and Productivity Effects – A Multi-sectoral CGE Analysis for Zambia (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:29:y:2012:i:6:p:2254-2268

DOI: 10.1016/j.econmod.2012.06.018

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