Aid for Trade and Global Growth

Takumi Naito

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: Aid for trade increases a recipient's public services, which lower its import and export transport costs. Formulating a two-country endogenous growth model, we obtain two main results. First, a permanent increase in the donor's aid/GDP ratio raises the steady-state growth rate as well as both countries' long-run fractions and cost shares of imported varieties if and only if it lowers the product of transport costs. Second, under a plausible condition, there exists a unique interior growth-maximizing aid/GDP ratio. These results are robust to alternative specifications for congestion and stock-flow nature of public goods.

Pages: 33 pages
Date: 2015-03
New Economics Papers: this item is included in nep-int and nep-mfd
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https://www.rieti.go.jp/jp/publications/dp/15e025.pdf (application/pdf)

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Journal Article: Aid for Trade and Global Growth (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:15025

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