The paper examines the effects of tied-aid on the welfare of both the donor and the recipient countries. We depart from the previous literature by assuming pre-existence of quantitative trade distortions. To migrate these distortions the donor dountry provides aid that is tied to the rationed...

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 pattern of consumption of the recipient country in the following period....

This paper examines the effects of a transfer on the intertemporal terms of trade in the context of a simple two-country, two-period model. When intertemporal trade occurs because the two economies have different rates of time preference, a transfer entails an improvement in the terms of trade...

This paper considers the optimal allocation by a donor country of a given amount of foreign aid between two recipient countries. It is shown that, ceteris paribus, a country following a more restrictive trade policy would receive a smaller share of the aid if the donor country maximises its own...

This paper establishes, in a very general setting, necessary and sufficient conditions for harmonization of economic policies to be welfare-improving. As an application, it is shown that under circumstances in which harmonization is known to be welfare-improving when taxes are levied on a...

The paper considers the welfare effect of the harmonisation of indirect taxes which finances the production of a non-tradeable public good. Such harmonisation affects the prices of the private goods not only directly but also via changes in public good provision in each country. The welfare...

This paper investigates the optimality of international income transfers in a two-country model in which each country engages in non-cooperative trade policy behaviour. It is shown that unconditional income transfers can never be optimal for the donor country, which not only suffers the loss of...

This paper considers the welfare effect of foreign aid when the recipient country has protectionist policy in the form of tariffs in place and aid is tied to the reduction of tariffs. It is shown that in a two country framework such aid cannot give rise to the well known transfer paradox. In the...

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...