Aid and Trade - A Donor’s Perspective

Felicitas Nowak-Lehmann D., Inmaculada Martínez-Zarzoso, Stephan Klasen and Dierk Herzer
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Felicitas Nowak-Lehmann D.: Georg-August University Göttingen, Germany
Authors registered in the RePEc Author Service: Felicitas Nowak-Lehmann D.

No 7, Courant Research Centre: Poverty, Equity and Growth - Discussion Papers from Courant Research Centre PEG

Abstract: One reason donors provide foreign aid is to support their exports to aid-recipient countries. Time series data for Germany suggests an average return of between US$ 1.04 to US$ 1.50 for each US dollar of aid spent by Germany. Although this is well below previous estimates, the value is robust to different specifications and econometric approaches. Interestingly, we find strong evidence of crowding out between bilateral donors in the sense that bilateral aid from other EU members significantly reduces exports from Germany to the recipients. The evidence suggests that, in the long-run, aid causes exports and not vice versa. We discuss the implications these findings might have for aid volumes and allocation.

Keywords: trade; foreign aid; donors; time series based panel estimation techniques (search for similar items in EconPapers)
JEL-codes: C23 F10 F35 (search for similar items in EconPapers)
Date: 2009-07-15
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Related works:
Journal Article: Aid and Trade - A Donor's Perspective (2009)
Working Paper: Aid and Trade - A Donor´s Perspective (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:got:gotcrc:007

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