Promoting Trade Liberalization: Theoretical Analysis of Foreign Aid as Prize

10 Pages Posted: 16 Jul 2015

See all articles by Malokele Nanivazo

Malokele Nanivazo

University of Kansas

Sajal Lahiri

Southern Illinois University Carbondale - Department of Economics

Date Written: August 2015

Abstract

We investigate whether foreign aid can be used to induce trade policy reforms. We develop a two‐period political economic model where promise of aid in period 2 depends on chosen tariff in period 1. We consider three scenarios depending on whether the donor is passive/active and whether the two governments move simultaneously or sequentially. We find a sufficient condition for unconditional aid to increase the level of optimal tariff, and the possibility of unconditional aid increasing optimal tariff decreases when the donor is active rather than passive.

Suggested Citation

Nanivazo, Malokele and Lahiri, Sajal, Promoting Trade Liberalization: Theoretical Analysis of Foreign Aid as Prize (August 2015). Review of Development Economics, Vol. 19, Issue 3, pp. 748-757, 2015. Available at SSRN: https://ssrn.com/abstract=2631274 or http://dx.doi.org/10.1111/rode.12157

Malokele Nanivazo (Contact Author)

University of Kansas

Sajal Lahiri

Southern Illinois University Carbondale - Department of Economics ( email )

MC 415
1000 Faner Drive
Carbondale, IL 62901
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
0
Abstract Views
86
PlumX Metrics