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Aid Allocation, Growth and Welfare with Productive Public Goods

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Author Info
Pierre-Richard Agénor
Devrim Yilmaz

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Abstract

This paper develops an open-economy intertemporal growth model with endogenous relative prices and an imperfect world capital market. The government provides two categories of public services, infrastructure and health, which are both productive. Externalities associated with infrastructure in the production of health services are also accounted for. The model is calibrated for a "typical" low-income country and used to examine the growth and welfare effects of both permanent and temporary, tied and untied, increases in aid. Dynamic trade-offs between the short- and the long-run effects of aid shocks on growth, welfare, and the real exchange rate are shown to depend crucially on the composition of aid flows.

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File URL: http://www.socialsciences.manchester.ac.uk/cgbcr/dpcgbcr/dpcgbcr95.pdf
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Publisher Info
Paper provided by Economics, The Univeristy of Manchester in its series Centre for Growth and Business Cycle Research Discussion Paper Series with number 95.

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Length: 52 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:man:cgbcrp:95

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Torvik, Ragnar, 2001. "Learning by doing and the Dutch disease," European Economic Review, Elsevier, vol. 45(2), pages 285-306, February. [Downloadable!] (restricted)
  2. Rajkumar, Andrew Sunil & Swaroop, Vinaya, 2008. "Public spending and outcomes: Does governance matter?," Journal of Development Economics, Elsevier, vol. 86(1), pages 96-111, April. [Downloadable!] (restricted)
  3. Kent P. Kimbrough, 1986. "Foreign Aid and Optimal Fiscal Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 19(1), pages 35-61, February. [Downloadable!] (restricted)
  4. David Roodman, 2004. "The Anarchy of Numbers: Aid, Development, and Cross-country Empirics," Development and Comp Systems 0412003, EconWPA. [Downloadable!]
    Other versions:
  5. Reinhart, Carmen & Ogaki, Masao & Ostry, Jonathan, 1996. "Saving Behavior in Low- and Middle-Income Developing Countries: A Comparison," MPRA Paper 6978, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  6. John Hudson & Paul Mosley, 2007. "Aid Volatility, Policy and Development," Working Papers 2007015, The University of Sheffield, Department of Economics, revised Oct 2007. [Downloadable!]
    Other versions:
  7. Turnovsky, Stephen J, 1997. "Equilibrium Growth in a Small Economy Facing an Imperfect World Capital Market," Review of Development Economics, Blackwell Publishing, vol. 1(1), pages 1-22, February. [Downloadable!] (restricted)
  8. Alexander Pivovarsky & Benedict J. Clements & Sanjeev Gupta & Erwin Tiongson, 2003. "Foreign Aid and Revenue Response: Does the Composition of Aid Matter?," IMF Working Papers 03/176, International Monetary Fund.
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Pierre-Richard Agénor & Joshua Aizenman, 2007. "Aid Volatility and Poverty Traps," NBER Working Papers 13400, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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