Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/128019
Authors: 
Harms, Philipp
Lutz, Matthias
Year of Publication: 
2003
Series/Report no.: 
Working Paper, Study Center Gerzensee 03.04
Abstract: 
Does official aid pave the road for private foreign investment or does it suffocate private initiative by diverting resources towards unproductive activities? In this paper we explore this question using data for a large number of developing and emerging economies. Controlling for countries' institutional environment, we find that, evaluated at the mean, the marginal effect of aid on private foreign investment is close to zero. Surprisingly, however, the effect is strictly positive for countries in which private agents face a substantial regulatory burden. After testing the robustness of this result, we offer a theoretical model that is able to rationalize our puzzling observation.
Subjects: 
Aid
Foreign Direct Investment
Institutions
JEL: 
F35
F21
O16
O19
Document Type: 
Working Paper

Files in This Item:
File
Size
467.81 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.