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- Title
Aid versus Trade Revisited: Donor and Recipient Policies in the Presence of Learning-by-Doing.
- Authors
Adam, Christopher S; O'Connell, Stephen A
- Abstract
We examine the (non) equivalence of aid and trade preferences as alternative forms of donor assistance in the presence of learning-by-doing externalities in recipient-country export production. Using a model based on van Wijnbergen (1985), we show that switching donor support on the margin from aid to trade preferences can increase recipient-country welfare. Simulations in which the productivity externality also interacts with private capital accumulation and fiscal distortions illustrate the potential growth and welfare gains from a revenue neutral re-orientation of donor assistance. We conclude by considering why these potential dynamic gains remain unexploited by both donors and recipients.
- Subjects
INTERNATIONAL economic assistance; EXPORTS; INTERNATIONAL trade; ECONOMICS; INTERNATIONAL economic relations
- Publication
Economic Journal, 2004, Vol 114, Issue 492, p150
- ISSN
0013-0133
- Publication type
Article
- DOI
10.1046/j.0013-0133.2003.00181.x