Optimal foreign aid and tariffs

Lahiri, Sajal, Raimondos-Møller, Pascalis, Wong, Kar-yiu, & Woodland, Alan D. (2002) Optimal foreign aid and tariffs. Journal of Development Economics, 67(1), pp. 79-99.

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This paper investigates the optimal choice of foreign aid when trade policies are decided in a non-cooperative fashion. Three alternative scenarios, depending on the timing of the actions and on whether aid is tied, are analyzed. It is shown that, in the case where aid is decided before tariffs, untied aid can lead to the reduction of the recipient's optimal trade tax. When the donor can tie the aid to a reduction in the recipient's tariff, the optimal aid level is always positive and the world can always achieve a Pareto-efficient equilibrium.

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25 citations in Scopus
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18 citations in Web of Science®

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ID Code: 94030
Item Type: Journal Article
Refereed: Yes
Keywords: Nash tariffs; Foreign aid; Tied aid
DOI: 10.1016/S0304-3878(01)00178-X
ISSN: 0304-3878
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Copyright Owner: Copyright 2002 Published by Elsevier B.V.
Deposited On: 22 Mar 2016 02:05
Last Modified: 22 Mar 2016 02:09

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