Multiple equilibria arising from donor’s aid policy in economic development

Koji Kitaura, Hikaru Ogawa and Sayaka Yakita

Journal of Macroeconomics, 2011, vol. 33, issue 4, 819-827

Abstract: This paper presents a neoclassical growth model comprising education and child labor with a focus on developing and aid-receiving countries to demonstrate cyclical growth and bifurcation in economic development. The appearance of multiple equilibria has often been attributed to the internal affairs of recipient countries, such as technology in production, subsistence minimum in consumption, and liquidity constraints in investment. The main argument of this paper is that the aid allocation policy employed by donor countries, thereby the motive of aid-providers, leads to divaricated and cyclical development in the recipient countries.

Keywords: Aid allocation; Fungibility; Multiple equilibria; Cyclical growth; Economic development (search for similar items in EconPapers)
JEL-codes: F35 O11 O38 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:33:y:2011:i:4:p:819-827

DOI: 10.1016/j.jmacro.2011.09.003

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