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Foreign Aid Reduces Labor Supply and Capital Accumulation
Author(s) -
Gong Liutang,
Zou Hengfu
Publication year - 2001
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/1467-9361.00110
Subject(s) - economics , consumption (sociology) , foreign capital , capital (architecture) , labour economics , endogenous growth theory , capital accumulation , monetary economics , macroeconomics , human capital , market economy , foreign direct investment , history , social science , archaeology , sociology
In an optimal growth model with foreign aid, foreign borrowing, and endogenous leisure‐and‐consumption choices, it is shown that a permanent rise in foreign aid reduces long‐run capital accumulation and labor supply, increases long‐run consumption, and has no effect on long‐run foreign borrowing.