Should Aid be Replaced by Better Access to Trade?

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Abstract

We examine the welfare effects of reforms in which both the amount of aid and the donor-imposed trade barriers (tariff or quotas) are reduced, i.e. aid is partially replaced by better access to trade. We consider two types of reforms: (i) a reform where the donor government's revenue is held constant, and (ii) a reform where the donor's utility is held constant. While the latter type of reforms unambiguously benefit the recipient, the former type may harm the recipient. In particular, a revenue-neutral reform, away from aid to lower tariff barrier, unambiguosly harms the recipient.
Original languageEnglish
JournalInternational Journal of Development Planning Literature
Volume15
Issue number2
Pages (from-to)135-145
Publication statusPublished - 2000

Keywords

  • Aid
  • Tariff
  • Quota
  • Reform

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