| Sumario: | The writer develops an intertemporal model of a small, developing economy typified by ongoing, or endogenous, growth to explore the effects of foreign aid. He explicitly characterizes and contrasts the dynamic response of such a recipient economy to aid programs that may, or may not, be linked to public investment. He notes that, although stylized, the analytical model is rich enough to address many of the key economic issues related to granting foreign aid. He compares the short- and long-term effects of foreign aid on the dynamic evolution and growth rate of the recipient economy and ultimately on the economic welfare of agents in the economy, before highlighting the policy implications of his findings for the UN's Millennium Development Goals.
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