Logic of Aid in an Intertemporal Setting

11 Pages Posted: 2 Apr 2004

See all articles by Slobodan Djajic

Slobodan Djajic

University of Geneva

Sajal Lahiri

Southern Illinois University Carbondale - Department of Economics

Pascalis Raimondos

Queensland University of Technology - School of Economics and Finance; Copenhagen Business School - Department of Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Abstract

The paper studies the welfare implications of temporary foreign aid in the context of a simple two-country model of trade. In addition to its usual effects, a transfer of income in one period is assumed to influence the preferences of the recipient country in the following period. The implied changes in the terms of trade over the two periods are consistent with a number of possible outcomes with respect to the intertemporal welfare of the donor, the recipient, and the world as a whole. Particular attention is devoted to the conditions for strict Pareto improvement and the circumstances under which temporary aid transactions are likely to occur.

Suggested Citation

Djajic, Slobodan and Lahiri, Sajal and Raimondos, Pascalis, Logic of Aid in an Intertemporal Setting. Review of International Economics, Vol. 12, pp. 151-161, February 2004. Available at SSRN: https://ssrn.com/abstract=513996

Slobodan Djajic (Contact Author)

University of Geneva ( email )

32 rue de Lausanne
CH-1202 Geneva
Switzerland
0041-22-733 3049 (Fax)

Sajal Lahiri

Southern Illinois University Carbondale - Department of Economics ( email )

MC 415
1000 Faner Drive
Carbondale, IL 62901
United States

Pascalis Raimondos

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia

Copenhagen Business School - Department of Economics ( email )

Solbjergs Plads 3
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Denmark
+45 38 152 594 (Phone)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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