A Dynamic Analysis of Tied Aid

Bharat R. Hazari (1) , Jean-Pierre Laffargue (2) , Chi-Chur Chao (3) , Eden S. H. Yu (4)

1 Chercheur indépendant
2 CES - Centre d'économie de la Sorbonne
3 CUHK - The Chinese University of Hong Kong [Hong Kong]
4 CUHK - City University of Hong Kong [Hong Kong]

In this paper we examine the impact of tied aid on capital accumulation and welfare in the presence of a quota on imports. Using a simulation model we establish that tied aid can lower the relative domestic price of the manufactured good and therefore reduce the stock of capital. In the presence of a strong production externality from capital accumulation and high tying ratio, tied aid may immiserize the recipient country.

Mots clés: Tied aid; Quotas; Capital; Welfare

Domaines: Economies et finances

Bharat R. Hazari, Jean-Pierre Laffargue, Chi-Chur Chao, Eden S. H. Yu. A Dynamic Analysis of Tied Aid. Sajal Lahiri. Theory and Practice of Foreign Aid, Elsevier, Amsterdam, pp.173-183, 2007, Frontiers of Economics and Globalization. ⟨halshs-00270896⟩