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Wiley InterScience | |||
  The Economic JournalVolume 114 Issue 492, Pages 150 - 173 Published Online: 5 Dec 2003 Journal compilation © 2010 by the Royal Economic Society (Registered Charity No. 231508) Published on behalf of the Royal Economic Society
Abstract | References | Full Text: HTML, PDF (Size: 160K) | Related Articles | Citation Tracking  Aid versus Trade Revisited: Donor and Recipient Policies in the Presence of Learning-by-Doing* Copyright 2004 Royal Economic Society ABSTRACTWe examine the (non) equivalence of aid and trade preferences as alternative forms of donor assistance in the presence of learning-by-doing externalities in recipient-country export production. Using a model based on van Wijnbergen (1985), we show that switching donor support on the margin from aid to trade preferences can increase recipient-country welfare. Simulations in which the productivity externality also interacts with private capital accumulation and fiscal distortions illustrate the potential growth and welfare gains from a revenue neutral re-orientation of donor assistance. We conclude by considering why these potential dynamic gains remain unexploited by both donors and recipients. Date of receipt of first submission: July 2000 Date of receipt of final typescript: April 2003 | 
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