Kiel Working Papers, Kiel Institute for World Economics
No 1468:
Aid and Sectoral Labour Productivity
Pablo Selaya and Rainer Thiele
Abstract: The paper examines empirically the proposition that aid to
poor countries is detrimental for external competitiveness, giving rise to
Dutch disease type effects. At the aggregate level, aid is found to have a
positive effect on growth of labour productivity. A sectoral decomposition
shows that the effect is significant and positive both in the tradables and
the nontradables sectors. The paper thus finds no empirical support for the
hypothesis that aid reduces external competitiveness in developing
countries. Possible reasons are the existence of large idle labour capacity
and high levels of dollarization in financial liabilities at the firm
level
Keywords: Foreign aid, sectoral labour productivity, Dutch disease; (follow links to similar papers)
JEL-Codes: F35,; O47; (follow links to similar papers)
25 pages, November 2008
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