Does German Development Aid Promote German Exports and German Employment? A Sectoral-Level Analysis

Inmaculada Martínez-Zarzoso, Felicitas Nowak-Lehmann D. (), Stephan Klasen and Florian Johannsen ()
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Felicitas Nowak-Lehmann D.: University of Goettingen / Germany, http://www.uni-goettingen.de/de/64104.html
Florian Johannsen: University of Goettingen / Germany
Authors registered in the RePEc Author Service: Felicitas Nowak-Lehmann D.

No 227, Ibero America Institute for Econ. Research (IAI) Discussion Papers from Ibero-America Institute for Economic Research

Abstract: This paper uses an augmented sectoral gravity model of trade to investigate the link between German development aid and exports from Germany to the aid recipient countries. The findings indicate that in the long run each dollar of German aid is associated with an average increase of US$ 0.83 of German exports of goods. The effect varies by sector and the sectors that gain the most are machinery, electrical equipment and transport equipment. By using German input-output tables and according to our estimates, the aid-induced gains in exports generate a total employment effect of about 164,000 jobs of which 66,000 jobs are created in machinery, 26,000 in transport equipment, 24,000 in electrical equipment, 23,500 in basic metals and 18,000 in food, beverages and tobacco. The paper distinguishes among recipient countries and finds that the return on aid measured by German exports is higher for aid to countries considered as partner countries by the German Ministry for Economic Cooperation and Development (BMZ countries).

Keywords: International Trade; Foreign Aid; Germany (search for similar items in EconPapers)
JEL-codes: F10 F35 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2013-09-20, Revised 2013-12-18
New Economics Papers: this item is included in nep-eur and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:got:iaidps:227

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