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Foreign Aid, Infrastructure Development, and Welfare: An Intertemporal Analysis

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  • Slobodan Djajić

Abstract

This paper examines the welfare implications of foreign aid within the framework of a two-period, two-country model of international trade. It is up to the donor country to decide what fraction of any given aid package is to be made available for the recipient's immediate, period-one consumption, and what part should be allocated for investment in infrastructure that expands the recipient's production possibilities in period two.

Suggested Citation

  • Slobodan Djajić, 2008. "Foreign Aid, Infrastructure Development, and Welfare: An Intertemporal Analysis," WIDER Working Paper Series RP2008-64, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:rp2008-64
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    File URL: https://www.wider.unu.edu/sites/default/files/rp2008-64.pdf
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    References listed on IDEAS

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    Keywords

    Capital investments; Economic assistance and foreign aid; Game theory; International trade;
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