|Author Name||NAITO Takumi (Waseda University)|
|Creation Date/NO.||March 2015 15-E-025|
|Research Project||Trade and Industrial Policies in a Complex World Economy|
|Download / Links|
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.
Published: Naito, Takumi, 2016. "Aid for trade and global growth," Review of International Economics, Vol. 24(5), pp. 1178-1201