Chapter 11 A Dynamic Analysis of Tied Aid

Chi-Chur Chao, Bharat Hazari, Jean-Pierre Laffargue and Eden Yu

A chapter in Theory and Practice of Foreign Aid, 2006, pp 173-183 from Emerald Group Publishing Limited

Abstract: In this paper we examine the impact of tied aid on capital accumulation and welfare in the presence of a quota on imports. Using a simulation model we establish that tied aid can lower the relative domestic price of the manufactured good and therefore reduce the stock of capital. In the presence of a strong production externality from capital accumulation and high tying ratio, tied aid may immiserize the recipient country.

Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:eme:fegzzz:s1574-8715(06)01011-6

DOI: 10.1016/S1574-8715(06)01011-6

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