2006年-世界发展银行全球_Aid_and_the_Supply_Side___Public_Investment_Export_Performance_and_Dutch_Disease_in_Low-Income_Countries_30页_255kb

Summary of "Aid and the Supply Side: Public Investment, Export Performance, and Dutch Disease in Low-Income Countries"

Core Content

This article explores the supply-side effects of foreign aid on economic growth, real exchange rates, and income distribution in low-income countries. It challenges the conventional focus on short-term demand-side Dutch disease effects, arguing that aid-financed public infrastructure investment can generate intertemporal productivity spillovers and learning-by-doing externalities, which may have positive long-term impacts on the economy, even if they initially cause a real exchange rate appreciation.

The authors develop a two-sector, two-good model (tradable and nontradable) to analyze how aid influences the economy through public investment and export dynamics. They then extend this into a computable general equilibrium simulation model based on data from Uganda, to assess the distributional and macroeconomic consequences of different aid allocation strategies.

Main Points

1. Dutch Disease and Aid

• Conventional view: Aid is often thought to cause a real exchange rate appreciation, which harms the tradable sector and reduces long-term growth.
• Alternative view: Aid can also enhance nontradable productivity through public infrastructure, which may lead to positive supply-side effects that dominate in the medium term.

2. Productivity Spillovers

• Public infrastructure investment creates inter-temporal productivity spillovers that benefit both tradable and nontradable sectors.
• These spillovers are sector-specific and not appropriable by individual firms.
• The learning-by-doing effect enhances total factor productivity in the tradable sector, depending on the volume of past exports.

3. Distributional Impacts

• Increased public investment tends to benefit urban households (both skilled and unskilled) more than rural households.
• Rural poor may be worse off in absolute terms due to terms of trade shifts and sectoral productivity imbalances.
• Nonhomothetic preferences (low income elasticity of demand for nontradables) exacerbate these distributional issues.

4. Model Structure

• The first-period equilibrium is determined by the income-expenditure balance and government budget constraint.
• The second-period equilibrium considers productivity effects and real exchange rate dynamics, influenced by the scale and composition of public investment and learning-by-doing externalities.

5. Key Results

• Real exchange rate appreciation in the short run is welfare-enhancing for the private sector due to terms of trade improvements.
• Public infrastructure investment leads to increased productivity in nontradable sectors, which may reverse Dutch disease effects in the medium term.
• The distributional effects of aid are significant, with urban households benefiting more than rural poor.
• Learning-by-doing can dilute the positive effects of public investment, but positive supply-side effects are generally stronger under plausible parameter settings.

Key Information

• Aid is treated as a fungible transfer of tradable resources.
• Public investment in infrastructure can lead to increased nontradable productivity, which in turn affects real exchange rates and output growth.
• Sectoral bias in public investment matters: investment in rural infrastructure benefits nontradables, while investment in urban infrastructure benefits tradables.
• The model highlights that aid can have complex, long-term effects on growth and welfare, which are not fully captured by simple demand-side models.
• Calibration to Uganda shows that nontradable productivity gains are the largest source of aggregate returns to aid, but they come at the cost of inequality.
• Sensitivity analysis confirms that the positive supply-side effects of aid are robust across different scenarios.

Implications for Policy

• Aid should be targeted to public infrastructure that enhances nontradable productivity for long-term growth.
• However, distributional consequences must be considered, as rural poor may be left behind.
• The interaction between aid and public investment is crucial for understanding macroeconomic outcomes in aid-dependent economies.
• Learning-by-doing effects can mitigate but not overturn the positive supply-side impacts of aid.