Using a two-country two-good model, we examine the welfare effects of foreign aid that facilitates factor movement between industries in the recipient country. The government of the donor country produces a public input, which the recipient's government is forced to purchase by spending aid as...

In this paper, we consider aid payments as a possible explanation for tariff overhangs. According to our hypothesis, rich countries may use development aid to pay for tariff concessions. Developing countries, in turn, may anticipate such a policy in the negotiations for tariff bindings. Setting...