Proceedings of the German Development Economics Conference, Kiel 2005 / Verein für Socialpolitik, Research Committee Development Economics 14
This paper presents a two-sector small semi-open economy Ramsey growth model involving foreign aid as an input in the production function. An activist government allocates this input endogenously across sectors and optimizes policies in a non-standard way. Once calibrated, mainly on countries exhibiting medium relative prices values, the model reproduces the main stylized facts outlined in the literature and suggests a strategy that could make aid work.
Foreign aid Economic development Economic growth Quantitative approach