The Welfare Analyses of Aid Tied with Tariff Wedge Adjustment

Ke-shaw Lian
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Ke-shaw Lian: Department of International Trade, National Cheng-Chi University, Taiwan and ¡@ Industrial Economics and Knowledge Center, Industrial Technology Research Institute, Taiwan

Journal of Economics and Management, 2008, vol. 4, issue 1, 25-34

Abstract: A general equilibrium model is established to analyze the effect of foreign aid tied with tariff wedge adjustments on economic welfare. The welfare effect of foreign aid depends on whether the government rebates tax revenue to households. I show that foreign aid tied with tariff wedge adjustment may immiserize the recipient country only if the government doesn¡¦t rebate tax revenues to households or if the increase of the tariff wedge of the imported goods over exported goods is too large.

Keywords: foreign aid; tariff wedge; transfer paradox (search for similar items in EconPapers)
JEL-codes: F59 R13 (search for similar items in EconPapers)
Date: 2008
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