Agglomeration and aid

Arbeitspapier

A key issue in development economics is the explanation of core-periphery patterns around the world. Combining this issue with that of analyzing unilateral transfers (e.g. foreign aid) points in the direction of the use of New Economic Geography (NEG) models which, so far, has not been done explicitly. This paper tries to fill this gap in the literature by studying the (possibly catastrophic') effects of aid around the so-called break-points and sustain-points in a NEG model. We also analyze the effects of a bystander , that is a country which is not directly involved in the transfer. In the traditional transfer literature a bystander is known to potentially cause transfer paradoxes. Our findings in this NEG setting are as follows. First, direct transfer paradoxes are not possible in a symmetric setting even if a bystander is present. Second, the effects of foreign aid depend on the level of economic integration between donor and recipient. Third, if the equilibrium from which aid is given is stable, aid only has a temporary effect (even if there is a bystander present). Fourth, if the donor is relatively large, not only the recipient but also the bystander benefits from foreign aid.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 1750

Classification and Topics

• Classification: Wirtschaft ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Foreign Aid
• Subject: Internationaler Transfer ; Entwicklungshilfe ; Agglomerationseffekt ; Wohlfahrtseffekt ; Neue ökonomische Geographie ; Entwicklungstheorie ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Brakman, Steven ; Garretsen, Harry ; van Marrewijk, Charles
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/25795
• Last update: 10.03.2025, 11:44 AM CET