aid for trade
Recently Published Documents

This is the first study to examine the effect of productive capacities on economic complexity and understand whether the Aid for Trade (AfT) flows is important for this effect in recipient countries. The analysis uses a sample of 126 developed and developing countries for 2002-2018 and adopts the two-step system Generalized Method of Moments approach. Results show that strengthening productive capacities enhances economic complexity. Furthermore, productive capacities and total AfT flows are strongly complementary in positively affecting economic complexity, and the degree of complementarity is higher for poor countries than for other AfT-recipient countries. Similarly, productive capacities are strongly complementary with total Non-AfT flows, as well as for total development aid. These findings highlight the need for scaling-up development aid flows, notably AfT flows, in favor of developing countries and poor countries having the lowest levels of productive capacities.

The effectiveness of Aid for Trade (AfT) interventions, including with respect to recipient countries’ trade performance, has now been well explored in the literature. However, in spite of the voluminous literature on the poverty effect of the total official development aid, the effect of AfT flows on poverty has received little attention on the empirical front. This paper aims to contribute to the policy debate on this matter by investigating the effect of AfT flows on poverty in recipient countries. In particular, the analysis explores whether this effect translates through countries’ level of export product concentration, as the latter can influence income inequality, and hence the transformation of economic growth into poverty reduction in recipient countries. The empirical analysis, based on 100[Formula: see text]AfT recipient countries, has shown that AfT interventions are associated with poverty reduction in countries that diversify their export products, including toward manufacturing products. Additionally, AfT flows dampen the positive poverty effect of income inequality, and lead to greater poverty reduction in countries with a great extent of fiscal redistribution. Finally, the analysis has shown that AfT interventions mitigate the positive poverty effect of import product concentration. These results have important policy implications.

Paris Declaration on Aid Effectiveness held in 2005 emphasized the role of Aid for Trade (AFT) on capacity building of developing nations. Past literature showed mixed results regarding the aid effectiveness of foreign aid both theoretically and empirically. To test the impact of foreign aid thoroughly, we first focus on the AFT which purposes are not only stimulating the volume of trade flow but also facilitating the construction of robust infrastructure and environment for developing nations to participate in the global economy independently. Second, we disaggregate bilateral trade into the extensive and intensive margin of international trade to examine whether AFT affects more on the new products traded or incumbent good. Lastly, we conduct Poisson pseudo maximum likelihood (PPML) estimation to control for zero-value observations and possible heteroskedasticity stemming from the sample. With different sample groups, the results indicate that AFT overall benefits the exports of aid recipients. Particularly, AFT from European Union (EU) shows the most considerable and consistent effect on both the new export and incumbent relationships. Furthermore, AFT from the EU facilitates the new export relationship between developing nations with other developing nations, specifically with those without a Free Trade Agreement (FTA) relationship, indicating that the aid from the EU is relatively effective in establishing new trade partners.

This article has explored whether Aid for Trade (AfT) flows that accrue to recipient-countries depend on the latter’s level of export product concentration. The analysis covers a sample of 132 countries over the period 2002–2017. The findings indicate that least developed countries (LDCs) receive higher AfT flows when they experience a rise in the level of export product concentration, while NonLDCs enjoy higher AfT flows when they diversify export products. Interestingly, higher amounts of AfT accrue to countries that diversify their export product basket towards manufacturing products, although different result patterns appear for the components of manufactured exports. JEL: F35; F14; O14

Abstract Many studies have considered the macroeconomic effects of Aid for Trade (AfT) flows, that is, the part of official development assistance allocated for the development of the trade sector. The present paper aims to expand this literature by investigating the effect AfT flows on financial development notably through channel of manufactured exports. The analysis has covered a set of 120 countries over the period 2002–2017, and relied primarily on the two-step system Generalized Methods of Moments (GMM). Results show that total AfT flows, notably its components AfT for economic infrastructure and AfT for productive capacity promote financial development, and the magnitude of these positive effects rises as countries' share of manufactured exports increases. Additionally, total AfT flows influence positively financial development in countries that diversify their export product basket towards manufactured exports. These findings highlight the key role of AfT flows in promoting financial development in recipient-countries, and therefore call on donor-countries to scale up AfT flows in favour of developing countries, given the importance of financial development for economic development.

This work aims to identify the existing relationship between aid-for-trade flows and export diversification in sub-Saharan Africa and to develop Asia countries. The results of the estimate, conducted by the Generalized Moments Method (GMM) over the period 1995-2019, show a positive impact of Aid for Trade on horizontal and vertical diversification of exports for the entire sample, including positive and significant effects on per capita GDP growth, gross capital formation, commercial freedom, human capital, and population growth. In the sub-Saharan African sub-sample, Aid for Trade positively impacts vertical and horizontal diversification and the other variables, such as GDP by habitat, FDI, gross capital formation, and human capital; on the other hand, in the sub-sample of Asian countries, aid has a negative impact on horizontal and vertical diversification; moreover, GDP, FDI, gross capital formation, human capital, population growth, and inflation have a positive influence. Our study compared to previous studies mainly dealt with the “impact of aid on export diversification” aggregated forms, but this study fills the gaps in the literature by examining the impact of trade aid on diversification. from its vertical and horizontal dimensions and contribute to the improvement of knowledge in this field.