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International Public Goods and the Case for Foreign Aid

Author
Jayaraman, Rajshri; Kanbur, Ravi
Abstract
In the presence of international public goods, donors are faced with two instruments whereby recipient utility may be altered -contributions towards the international public good and direct transfers (conventional foreign aid). The self-interested donor's optimal choice of transfer-contributions combinations will typically depend upon the public goods technology. Some technologies call for a corner solution, with either transfers or contributions set to zero, and others are characterised by interior solutions, where the donor's optimal strategy calls for a positive transfers and positive contributions. Whether or not the presence of an international public good strengthens the case for conventional foreign liid transfers is therefore not always obvious.
Description
WP 1999-05 March 1999
Date Issued
1999-03-01Publisher
Charles H. Dyson School of Applied Economics and Management, Cornell University
Type
article