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Growth, Income Inequality and Aid Giving: Looking for an Aid-Kuznets Curve AgEcon
Sobhee, Sanjeev K.; Nath, Shyam.
This paper contributes to the literature on foreign aid by exclusively explaining a donor’s motivation for foreign external assistance. The underlying framework focuses on recipients’ needs for foreign aid to address income inequality as and when growth occurs. A tax-subsidy policy is hypothesised in the manner advocated by optimal tax theory to effectively deal with inequity by minimizing the distortionary effects of income taxes. This framework is ultimately endogeneized in the recipient’s budget constraint, from which the donor derives the demand for foreign assistance. The outcome supports an inverted-U relationship between foreign aid and per capita income in the way postulated by the conventional Kuznets curve. Our postulate is empirically tested...
Tipo: Journal Article Palavras-chave: Foreign aid; Optimal taxation; Fiscal policy; International Relations/Trade; F35; H21; E62.
Ano: 2007 URL: http://purl.umn.edu/50163
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