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Heterogeneous effects of Aid‐for‐Trade on donor exports: Why is Japan different?

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  • Shuhei Nishitateno
  • Hayato Umetani
Abstract
This study estimates the Aid‐for‐Trade (AfT)‐export elasticity from the donor perspective, focusing on the top‐five donor countries: Japan, Germany, France, US, and UK. We find the elasticity for Japan is large, suggesting that the Japanese AfT generates a net export expansion, in contrast with the other top donors. We examine the potential mechanism behind the export creation effect of Japanese AfT using unique contract data on infrastructure‐related projects worldwide. The results suggest that Japanese AfT, highly concentrated in economic infrastructure, works as an informal tying arrangement, closely linking aid to donor exports associated with capital goods for infrastructure construction.

Suggested Citation

  • Shuhei Nishitateno & Hayato Umetani, 2023. "Heterogeneous effects of Aid‐for‐Trade on donor exports: Why is Japan different?," Review of International Economics, Wiley Blackwell, vol. 31(3), pages 1117-1145, August.
    • Handle: RePEc:bla:reviec:v:31:y:2023:i:3:p:1117-1145
    DOI: 10.1111/roie.12656
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    References listed on IDEAS

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    1. Lee, Hyun-Hoon & Ries, John, 2016. "Aid for Trade and Greenfield Investment," World Development, Elsevier, vol. 84(C), pages 206-218.
    2. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
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    4. Bernard Hoekman & Anirudh Shingal, 2020. "Aid for trade and international transactions in goods and services," Review of International Economics, Wiley Blackwell, vol. 28(2), pages 320-340, May.
    5. Nishitateno, Shuhei, 2013. "Global production sharing and the FDI–trade nexus: New evidence from the Japanese automobile industry," Journal of the Japanese and International Economies, Elsevier, vol. 27(C), pages 64-80.
    6. Alesina, Alberto & Dollar, David, 2000. "Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March.
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    8. Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann & M. D. Parra & Stephan Klasen, 2014. "Does Aid Promote Donor Exports? Commercial Interest versus Instrumental Philanthropy," Kyklos, Wiley Blackwell, vol. 67(4), pages 559-587, November.
    9. Arellano, Cristina & Bulír, Ales & Lane, Timothy & Lipschitz, Leslie, 2009. "The dynamic implications of foreign aid and its variability," Journal of Development Economics, Elsevier, vol. 88(1), pages 87-102, January.
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    Cited by:

    1. Hoekman, Bernard & Shingal, Anirudh, 2024. "Development Goals, commercial interest and EU Aid-for-Trade," World Development, Elsevier, vol. 173(C).

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    More about this item

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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