We develop a political-economic model of aid fungibility. A donor country gives aid to a recipient government for the benefit of a target group. However, the recipient government accepts political contributions from a lobby group not targeted by the donor and transfers a fraction of the aid to...

This paper first of all develops a theoretical model to examine a number of heterogeneous firms' choice between making export-oriented foreign direct investments (FDI) in a host country and making FDI in another country to serve the market there. It is shown that all firms below a critical level...

This paper studies the welfare implications of temporary foreign aid in the context of a simple two-country model of trade. In addition to its usual effects, a transfer of income in one period is assumed to influence the preferences of the recipient country in the following period. The implied...

We construct a two-country model where pollution from production is transmitted across borders. Pollution abatement is undertaken sequentially by private producers and the public sector. We characterize the Nash optimal levels of the policy instruments in the two countries: emission taxes and...

We develop a political-economic model of foreign aid allocation. Each ethnic group in the donor country lobbies the government for allocating more aid to its country of origin, and the government accepts contributions from lobby groups. Initial per-capita income of the recipients and those of...

Purpose – The purpose of this paper is to examine the effects of four policy options for the international community to help resolve conflicts involving black diamonds: foreign aid, a tax arms exports, a tax on blood diamond and a tax on diamond exports in general from the war zones....