Immiserizing Foreign Aid: The Roles of Tariffs and Nontraded Goods

IMF Working Papers, May 1, 2006

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Immiserizing Foreign Aid: The Roles of Tariffs and Nontraded Goods

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Bibliographic details

• Authors: Stephen Tokarick
• Published: May 1, 2006
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451863895.001

Summary and central finding

• International trade theory has pointed out that factor accumulation could immiserize a country if it is sufficiently biased toward the export sector, or if it is biased toward an importcompeting sector in the presence of tariff protection.
• This paper analyzes the impact of aid, in the form of an increase in the capital stock used only in the nontraded sector, on real income.
• Yano and Nugent (1999) discussed this issue, but their analysis turned out to be incorrect.
• This paper demonstrates that whether aid in the form of an increase in capital specific to the nontraded sector reduces welfare depends on:
  • how aid affects the price of the nontraded good, and
  • whether imports and the nontraded good are substitutes or complements in demand.

Analytical focus and scope

• Focus: impact of aid modeled as an increase in capital specific to the nontraded sector on real income and welfare.
• Key mechanisms examined:
  • price effects on the nontraded good caused by sector-specific capital accumulation, and
  • demand relationships between imports and the nontraded good (substitutes versus complements).
• Corrects and revises the prior analysis by Yano and Nugent (1999), which the paper finds to be incorrect.

Subject areas and keywords

• Subject: Factor models, Imports, Inflation, Labor, Tariffs
• Keywords: WP

Publication and citation metadata

• Author: Stephen Tokarick
• Date: May 1, 2006
• Series: Working Paper No. 2006/129
• Issue: 129
• Volume: 2006
• Pages: 17
• DOI: https://doi.org/10.5089/9781451863895.001
• Stock No: WPIEA2006129
• ISBN: 9781451863895
• ISSN: 1018-5941
• Citation preview (format: Chicago): Stephen Tokarick. "Immiserizing Foreign Aid: The Roles of Tariffs and Nontraded Goods", IMF Working Papers 2006, 129 (2006), accessed 9/17/2026, https://doi.org/10.5089/9781451863895.001

Source: Immiserizing Foreign Aid: The Roles of Tariffs and Nontraded Goods, IMF Working Papers No. 2006/129.

Content in this bundle

• _wp06129 — Sections 1–2
  • _wp06129 — Sections 1–2 (Markdown version)
  • _wp06129 — Sections 1–2 (PDF)