Competition for aid and trade policy

Lahiri, S. & Raimondos-Møller, Pascalis (1997) Competition for aid and trade policy. Journal of International Economics, 43(3-4), pp. 369-385.

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Abstract

This paper considers the optimal allocation of a given amount of foreign aid between two recipient countries. It is shown that, given consumer preferences, a country following a more restrictive trade policy would receive a smaller share of the aid if the donor country maximises its own welfare in allocating aid. If, on the other hand, the donor country allocates aid in order to maximize the sum of the welfare of the two recipient countries, the result is just the opposite. Finally, we analyze the situation where the recipient countries compete with each other for the given amount of aid. It is shown that this competition tends to lower the level of optimal tariffs in the recipient countries.

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19 citations in Scopus
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ID Code: 94013
Item Type: Journal Article
Refereed: Yes
ISSN: 0022-1996
Copyright Owner: Copyright 1997 Elsevier BV
Deposited On: 22 Mar 2016 04:50
Last Modified: 22 Mar 2016 04:51

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