Foreign Aid and Foreign Policy
In: The Western political quarterly, Band 17, Heft 4, S. 840
ISSN: 1938-274X
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In: The Western political quarterly, Band 17, Heft 4, S. 840
ISSN: 1938-274X
In: Brooking Staff Paper, The Brookings Institution
In: Harvard international law journal, Band 27, Heft 1, S. 275
ISSN: 0017-8063
In: Journal of the Royal United Service Institution, Band 80, Heft 520, S. 891-895
ISSN: 1744-0378
In: Journal of the Royal United Service Institution, Band 80, Heft 520, S. 878-881
ISSN: 1744-0378
In: Journal of the Royal United Service Institution, Band 80, Heft 519, S. 675-676
ISSN: 1744-0378
In: Journal of the Royal United Service Institution, Band 80, Heft 519, S. 662-665
ISSN: 1744-0378
In: Selaya , P & Sunesen , E R 2008 ' Does Foreign Aid Increase Foreign Direct Investment? ' Department of Economics, University of Copenhagen .
The notion that foreign aid and foreign direct investment (FDI) are complementary sources of capital is conventional among governments and international cooperation agencies. This paper argues that the notion is incomplete. Within the framework of an open economy Solow model we show that the theoretical relationship between foreign aid and FDI is indeterminate. Aid may raise the marginal productivity of capital by financing complementary inputs, such as public infrastructure projects and human capital investment. However, aid may also crowd out productive private investments if it comes in the shape of physical capital transfers. We therefore turn to an empirical analysis of the relationship between FDI and disaggregated aid flows. Our results strongly support the hypotheses that aid invested in complementary inputs draws in foreign capital while aid invested in physical capital crowds out FDI. The combined effect of these two types of aid is small but on average positive
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ISSN: 0270-370X
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