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Aid as a Catalyst for Pioneer Investment

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  • Paul Collier

Abstract

I discuss how aid can support growth in small, isolated economies. Small markets frustrate scale economies and competition. Combined with high transport costs, essential inputs become prohibitively expensive. Breaking the coordination problem requires pioneering investment. Since this generates externalities it will be undersupplied. Donors have both the finance and the long-term relationships that could offset the externalities and political risks that impede pioneers. However, there are practical difficulties of how such support is best organized.

Suggested Citation

  • Paul Collier, 2013. "Aid as a Catalyst for Pioneer Investment," WIDER Working Paper Series wp-2013-004, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2013-004
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    File URL: https://www.wider.unu.edu/sites/default/files/wp2013-004.pdf
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    1. Måns Söderbom, 2012. "Firm Size and Structural Change: A Case Study of Ethiopia-super- †," Journal of African Economies, Centre for the Study of African Economies, vol. 21(suppl_2), pages -151, January.
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    Cited by:

    1. Paul COLLIER, 2014. "Fragile African States: What Should Donors Do?," Working Papers P95, FERDI.
    2. Paul COLLIER, 2014. "Fragile African States: What Should Donors Do?," Working Papers P95, FERDI.

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