Attracting foreign investment: Optimal ODA policy with trade liberalization

Ryusuke Ihara and Roki Iwahashi

The Journal of International Trade & Economic Development, 2007, vol. 16, issue 2, 193-211

Abstract: This paper presents a theoretical framework for analyzing the efficient use of foreign aid (ODA) in attracting foreign direct investment, based on the variant of recent economic geography models. A salient result is that recipient countries with less trade openness should direct ODA towards social infrastructure, whereas it should be aimed toward developing economic infrastructure if the target country is a sufficiently open economy. The second result is that, in spite of optimal ODA policy, capital might outflow temporarily from less-developed countries at the beginning of trade liberalization. These results are consistent with empirical observations of 74 recipient countries for the time period 1991 - 2001.

Keywords: Aid policy; foreign direct investment; trade liberalization; new economic geography (search for similar items in EconPapers)
Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/09638190701325524 (text/html)
Access to full text is restricted to subscribers.

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:taf:jitecd:v:16:y:2007:i:2:p:193-211

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RJTE20

DOI: 10.1080/09638190701325524

Access Statistics for this article

The Journal of International Trade & Economic Development is currently edited by Pasquale Sgro, David E.A. Giles and Charles van Marrewijk

More articles in The Journal of International Trade & Economic Development from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().