Foreign Aid and the Business Cycle

This paper documents empirical regularities in the foreign aid flows to developing countries over three decades. In spite of a large body of literature on foreign aid and its impact on recipients, surprisingly little is known about its business cycle characteristics. The authors show that for the vast majority of African recipients, aid flows are a major source of income that is highly volatile and, most importantly, overwhelmingly procyclical. For recipients outside of Africa, there is a similar—if somewhat less pronounced—pattern of aid procyclicality. In contrast, there is little evidence of aid procyclicality with the business cycle of donors. In light of the very high volatility of output in developing countries, the procyclicality of foreign aid flows from the recipients' perspective raises serious questions related to their welfare and growth.     

Foreign Aid under Quantitative Restrictions: Welfare Effects and International Factor Mobility

Using a two‐country, general‐equilibrium model of international trade, this paper incorporates pre‐existing quantitative trade restrictions and international factor mobility into the transfer problem analysis. The effects of foreign aid on the welfare of both the donor and recipient nations are identified under each form of quantitative trade restriction: quotas and voluntary export restraints (VERs). In doing so, this paper identifies conditions under which international transfers are strictly Pareto‐improving (i.e. increase global welfare). A central result of this analysis is the direct welfare effect of a transfer received by a nation with quota‐constrained (VER‐constrained) imports is enhanced (may be enhanced) by a worsening of the recipient’s terms of trade.     

The Basic Needs Strategy,the Congressional Mandate,and U.S. Foreign Aid Policy

In line with Veblen's contributions on the "dark side" of commercial and political relationships, we show how promises can be used to manipulate the "common man." By imposing excessive access costs on potential promisees (e.g., citizens or consumers), a promiser (e.g., a politician or a firm) can benefit from making a promise without having to wholly fulfill it. These strategically manipulated access costs can be legitimized by the need to prevent abuse and fraud that exempts the promiser from being accused of cheating. Here, two case studies on promises offered to eligible households - the Food Stamp/Supplemental Nutrition Assistance Program and rebates - are developed. Some policy implications are drawn and extensions are suggested.     

Foreign Aid, Domestic Investment and Welfare

This paper examines the welfare implications of temporary foreign aid in a simple two-period, two-country model of trade. Domestic investment is endogenous, providing an important link between aid in period one and the terms of trade in periods one and two. Transfer-induced changes in the terms of trade redistribute present and future income between the donor and the recipient. In the presence of barriers to international borrowing and lending, such redistribution gives rise to the possibility of temporary aid being both potentially and strictly Pareto improving.     

Foreign Aid Reduces Labor Supply and Capital Accumulation

In an optimal growth model with foreign aid, foreign borrowing, and endogenous leisure-and-consumption choices, it is shown that a permanent rise in foreign aid reduces long-run capital accumulation and labor supply, increases long-run consumption, and has no effect on long-run foreign borrowing.     

金融危机背景下的欧盟对外发展援助

欧盟对外发展援助是欧盟及其成员国对发展中国家给予的财政、技术和人员等方面的援助。欧盟出于历史上的殖民联系、经济发展的需要和长远安全战略的考虑,在对外关系中,十分重视发展和加强同发展中国家的关系,1957年以来一直积极参与国际社会的对外发展援助活动。目前在金融危机的影响下,国际社会普遍缺少资金,欧盟对外发展援助资金在地域分布上开始由"全球性"转向"内向性";在部门分配的重点上还处于调整之中。欧盟等发达国家和集团要认识到金融危机让市场经济体制不完善的发展中国家受到了比发达国家更为严重的打击,因此应克服金融危机的干扰,切实履行援助承诺,继续向广大发展中国家提供和增加援助,从而降低发展中国家在危机中所遭受的伤害,以构筑一个较为理想与和谐的全球发展环境。     

Foreign Aid in the Presence of Corruption: Differential Games among Donors

We consider two dynamic games of foreign aid. Model 1 deals with the case where donor countries continually feel the warm glow from the act of giving. Model 2 postulates that donors will stop giving aid when a target level of development is reached. In Model 1 , there are multiple equilibria that can be Pareto ranked. In Model 2 , the equilibrium strategies are nonlinear functions of the level of development. The flow of aid falls at a faster and faster rate as the target is approached. An increase in corruption will increase the flow of aid.     

The Politics of Foreign Aid: A Median Voter Perspective

The paper presents a model where the median voter in the donor country determines the support of foreign aid. It is first established that an individual in the donor country is affected by the direct benefits (due to altruism) and costs (due to taxes) of giving aid, and by the indirect benefits or costs of a change in the terms of trade. Then it is shown that the latter effect works through changing both the donor country's average income and its distribution of income. Given the stylized facts of a capital-abundant donor country and relatively capital-poor median voter, it is shown how redistribution-of-income effects soften the impact of terms-of-trade changes on the political support for foreign aid.     

An Empirical Analysis of the Determinants of Foreign Aid: A Panel Approach

This paper uses a panel approach to examine the determinants of foreign aid. It examines the extent to which taxes on international trade and the scope of government activities, ethnicity, private credit, and education determine foreign aid. The paper specifies and estimates a model that explains the allocation of foreign aid among 151 countries over the period 1975 to 1998. The key empirical finding suggests that Taxes on Trade increases foreign aid dependency. Moreover, trade, private credit, foreign direct investment, GDP per worker, and government consumption are important determinants of foreign aid. The factors that appear to decrease foreign aid include: Years of schooling, private credit, trade, and GDP per worker. The factors that appear to increase foreign aid include: Taxes on international trade, ethnicity, and government consumption.     

Foreign Aid as Prize: Incentives for a Pro-Poor Policy

The authors develop a theoretical model of foreign aid to analyze a method of disbursement of aid which induces the recipient government to follow a more pro-poor policy than it otherwise would do. In their two-period model, aid is given in the second period and the volume of it depends on the level of well-being of the target group in the first period. They find that this way of designing aid does increase the welfare of the poor. They also consider the situations where the donor and the recipient governments act simultaneously as well as sequentially, and they find that, by moving first in a sequential game, the donor country can, under certain conditions, increase the welfare of the poor and that of its own country compared to the case of simultaneous moves.     

Fungibility and the flypaper effect of project aid: Micro-evidence for Vietnam

While most economists assume that aid is fungible, most aid donors behave as if it is not. Recipient government responses to development project aid are studied in the context of a specific World Bank-financed project. We estimate the impact of a rural road rehabilitation project in Vietnam on the kilometers of roads actually rehabilitated and built. Using local-level survey data collected for this purpose, we test whether the evidence supports the standard economic argument that there will be little or no impact on rural roads rehabilitated, given fungibility. Instead of full fungibility, we find evidence for a “flypaper effect”. Although impacts on rehabilitated road kilometers were less than intended, more roads were built in project areas. Our results suggest that there was fungibility within the sector, but that aid largely stuck to that sector.     

Foreign Aid, Infrastructure Development and Welfare: An Intertemporal Analysis

The author 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 consumption in period one, and what part should be allocated for investment in infrastructure that expands the recipient's production possibilities in period two. The focus of the analysis is on the conditions under which both countries agree or disagree on the manner in which the aid funds should be divided between the two options.     

国外政府对小企业发展的支持策略研究

首先从质和量两个方面对小企业进行了界定,将国外政府对小企业的支持策略归结为六个方面,即完备的小企业立法、有力的财政金融政策、专门的政府小企业管理和服务机构、大力扶持小企业科技创新、积极鼓励小企业走国际化道路及取消对小企业的若干限制性条款.从中得出对我国小企业有益的启示,我国小企业发展应当拥有健全的法律法规制定专门的小企业管理机构;维护小企业利益、监督政策与法律的实施,并向小企业提供贷款支持及技术管理等方面的服务;针对小企业融资难问题采取有力的财政金融政策;在税收优惠、专项基金、政府采购等方面创造有利条件,并加强服务于小企业的金融机构建设和信用体系建设;支持和保障小企业技术创新和国际市场拓展;政府在技术创新基金、科技与商业情报、办事流程等方面提供支持和便利;建立促进我国小企业发展的服务体系,为小企业扶持政策的制定和落实提供组织保障.     

The Financing of Foreign Aid and Welfare: Income Versus Consumption Tax

Empirical evidence shows that developed countries use income or consumption taxes to generate tax revenue, of which they transfer a certain fraction as aid to less developed countries. This paper constructs a two-country general equilibrium trade model that takes into account these realities, and examines the terms of trade, employment and welfare effects of international transfers when the donor country increases the fraction of its income or consumption tax revenue transferred as aid. The desirability of each method of aid financing is discussed from the viewpoint of national and world welfare, and conditions are identified under which aid improves world welfare with the one method of financing, and may worsen it with the other.     

Think Globally,Teach Locally: Experiencing the Foreign Aid Debate Through Service Learning

Abstract

Novel curricular strategies are required if institutions want all students to actively experience the benefits of global knowledge and civic engagement, as financial and practical commitments frequently make study abroad inaccessible to many students. In this paper, we outline an innovative service-learning course, where local action coupled with an international target, offered a parallel and novel learning strategy that capitalized on the strengths of experiential education, while providing a practical and more inclusive student engagement opportunity available to a larger subset of students. We also describe our teaching strategy, which emphasizes the social context of the classroom: discovery, self-exploration, and shared learning. Together, service learning and a critical pedagogy can better help students relate to the otherwise abstract processes of foreign aid. In 2013 and 2014, approximately 30 undergraduate students participated in a student-led outreach project soliciting bicycle donations to support human development efforts in Uganda and Ghana. In addition to making reasonable progress toward learning outcomes during the two-year pilot, we found that the everyday challenges our students encountered in their service-learning project were microcosms for some of the large-scale, global challenges that foreign aid delivery faces.