Martínez-Zarzoso, Inmaculada Nowak-Lehmann D., Felicitas Klasen, Stephan
Year of Publication:
Proceedings of the German Development Economics Conference, Hannover 2010 No. 28
This paper uses the gravity model of trade to investigate the link between bilateral and multilateral foreign aid and donor's exports. There are three primary findings from this approach. First, in the long term, the average return, in terms of an increase in the donor's level of goods exports, is approximately $ 2.15 US for every aid dollar spent on bilateral aid. Second, multilateral aid has a positive effect on export levels only in the short term, whereas in the long term, the effect is negative. Third, aid from other donors does not give rise to a displacement effect for a given donor-recipient trade relationship. This paper also makes comparisons among donors and finds that aid has a positive and significant effect on most donors' export levels.
exports foreign aid donors panel data sample selection GLM