Altruism, Trade Policy, and the Optimality of Foreign Aid

Lahiri, Sajal & Raimondos-Moller, Pascalis (1999) Altruism, Trade Policy, and the Optimality of Foreign Aid. In Gupta, Kanhaya L. (Ed.) Foreign Aid: New Perspectives. Springer US, Boston, pp. 21-35.

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There are many studies in the literature that deal with the welfare effects of income transfers between nations in a general equilibrium setting. An important impetus for this extensive literature was the demonstration of the transfer paradox; that the donor country could actually gain from a transfer of income to another, and that the recipient could lose as a result of the gift. The reason for this paradoxical result is that the transfer gives rise to a terms-of-trade effect that may be especially beneficial to the donor and detrimental to the recipient. Subsequently, many papers have established conditions under which this paradox will or will not occur. Early work by Samuelson (1954) was followed by demonstrations of paradoxes by Gale (1974), Ohyama (1974), Brecher and Bhagwati (1982) and Bhagwati, Brecher and Hatta 1983, 1985, and Dixit (1983)) among others.1 More recently, many studies have examined whether or not foreign aid — tied and untied — can be welfare improving for both the donor and the recipient (see, for example, Turunen-Red and Woodland (1988), Kemp and Wong (1993), Schweinberger (1990), Hatzipanayotou and Michael (1995), Lahiri and Raimondos-Moller 1995, 1997, Djajić, Lahiri and Raimondos-Møller 1996a, 1996b, and Lahiri, Raimondos-Møller, Wong and Woodland 1997.2

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ID Code: 94010
Item Type: Book Chapter
DOI: 10.1007/978-1-4615-5095-2_2
ISBN: 9781461550952
ISSN: 0924-199X
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Copyright Owner: Copyright 2015 Springer Science+Business Media New York
Deposited On: 30 Mar 2016 00:17
Last Modified: 30 Mar 2016 00:19

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