## Immiserizing Foreign Aid: The Roles of Tariffs and Nontraded Goods

_IMF Working Papers, May 1, 2006_

## Source details

**Canonical URL:** [Immiserizing Foreign Aid: The Roles of Tariffs and Nontraded Goods](https://www.imf.org/en/publications/wp/issues/2016/12/31/immiserizing-foreign-aid-the-roles-of-tariffs-and-nontraded-goods-19100)

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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

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### 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.*

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## Content in this bundle

- **_wp06129 — Sections 1–2**
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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/immiserizing-foreign-aid-the-roles-of-tariffs-and-nontraded-goods-19100_