IDEAS home Printed from https://ideas.repec.org/p/got/iaidps/227.html
   My bibliography  Save this paper

Does German Development Aid Promote German Exports and German Employment? A Sectoral-Level Analysis

Author

Abstract

This paper uses an augmented sectoral gravity model of trade to investigate the link between German development aid and exports from Germany to the aid recipient countries. The findings indicate that in the long run each dollar of German aid is associated with an average increase of US$ 0.83 of German exports of goods. The effect varies by sector and the sectors that gain the most are machinery, electrical equipment and transport equipment. By using German input-output tables and according to our estimates, the aid-induced gains in exports generate a total employment effect of about 164,000 jobs of which 66,000 jobs are created in machinery, 26,000 in transport equipment, 24,000 in electrical equipment, 23,500 in basic metals and 18,000 in food, beverages and tobacco. The paper distinguishes among recipient countries and finds that the return on aid measured by German exports is higher for aid to countries considered as partner countries by the German Ministry for Economic Cooperation and Development (BMZ countries).

Suggested Citation

  • Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann D. & Stephan Klasen & Florian Johannsen, 2013. "Does German Development Aid Promote German Exports and German Employment? A Sectoral-Level Analysis," Ibero America Institute for Econ. Research (IAI) Discussion Papers 227, Ibero-America Institute for Economic Research, revised 18 Dec 2013.
    • Handle: RePEc:got:iaidps:227
    as

    Download full text from publisher

    File URL: http://www2.vwl.wiso.uni-goettingen.de/ibero/working_paper_neu/DB227.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    2. de Sousa, José, 2012. "The currency union effect on trade is decreasing over time," Economics Letters, Elsevier, vol. 117(3), pages 917-920.
    3. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-481, August.
    4. A. Bhargava & L. Franzini & W. Narendranathan, 2006. "Serial Correlation and the Fixed Effects Model," World Scientific Book Chapters, in: Econometrics, Statistics And Computational Approaches In Food And Health Sciences, chapter 4, pages 61-77, World Scientific Publishing Co. Pte. Ltd..
    5. Alesina, Alberto & Dollar, David, 2000. "Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March.
    6. Hristos Doucouliagos & Martin Paldam, 2006. "Aid Effectiveness on Accumulation: A Meta Study," Kyklos, Wiley Blackwell, vol. 59(2), pages 227-254, May.
    7. Felicitas Nowak-Lehmann & Inmaculada Martínez-Zarzoso & Dierk Herzer & Stephan Klasen & Adriana Cardozo, 2013. "Does foreign aid promote recipient exports to donor countries?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(3), pages 505-535, September.
    8. repec:bla:germec:v:10:y:2009:i::p:317-338 is not listed on IDEAS
    9. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    10. Jean‐Claude Berthélemy, 2006. "Bilateral Donors’ Interest vs. Recipients’ Development Motives in Aid Allocation: Do All Donors Behave the Same?," Review of Development Economics, Wiley Blackwell, vol. 10(2), pages 179-194, May.
    11. Wagner, Don, 2003. "Aid and trade--an empirical study," Journal of the Japanese and International Economies, Elsevier, vol. 17(2), pages 153-173, June.
    12. Felicitas Nowak‐Lehmann & Axel Dreher & Dierk Herzer & Stephan Klasen & Inmaculada Martínez‐Zarzoso, 2012. "Does foreign aid really raise per capita income? A time series perspective," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(1), pages 288-313, February.
    13. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
    14. Simone Juhasz Silva & Douglas Nelson, 2012. "Does Aid Cause Trade? Evidence from an Asymmetric Gravity Model," The World Economy, Wiley Blackwell, vol. 35(5), pages 545-577, May.
    15. Bergstrand, Jeffrey H, 1989. "The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 143-153, February.
    16. Maizels, Alfred & Nissanke, Machiko K., 1984. "Motivations for aid to developing countries," World Development, Elsevier, vol. 12(9), pages 879-900, September.
    17. Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
    18. Heller, Peter S, 1975. "A Model of Public Fiscal Behavior in Developing Countries: Aid, Investment, and Taxation," American Economic Review, American Economic Association, vol. 65(3), pages 429-445, June.
    19. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April.
    20. Mosley, Paul & Hudson, John & Horrell, Sara, 1987. "Aid, the Public Sector and the Market in Less Developed Countries," Economic Journal, Royal Economic Society, vol. 97(387), pages 616-641, September.
    21. Jan Pettersson & Lars Johansson, 2013. "Aid, Aid for Trade, and bilateral trade: An empirical study," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(6), pages 866-894, September.
    22. Berthelemy, Jean-Claude & Tichit, Ariane, 2004. "Bilateral donors' aid allocation decisions--a three-dimensional panel analysis," International Review of Economics & Finance, Elsevier, vol. 13(3), pages 253-274.
    23. Easterly, William & Williamson, Claudia R., 2011. "Rhetoric versus Reality: The Best and Worst of Aid Agency Practices," World Development, Elsevier, vol. 39(11), pages 1930-1949.
    24. Nelson C. Mark & Donggyu Sul, 2003. "Cointegration Vector Estimation by Panel DOLS and Long‐run Money Demand," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(5), pages 655-680, December.
    25. repec:bla:ausecr:v:39:y:2006:i:1:p:78-88 is not listed on IDEAS
    26. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    27. Mak Arvin & Bruce Cater & Saud Choudhry, 2000. "A causality analysis of untied foreign assistance and export performance: the case of Germany," Applied Economics Letters, Taylor & Francis Journals, vol. 7(5), pages 315-319.
    28. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Martínez-Zarzoso Inmaculada & Klasen Stephan & Nowak-Lehmann D. Felicitas & Larch Mario, 2009. "Does German Development Aid Promote German Exports?," German Economic Review, De Gruyter, vol. 10(3), pages 317-338, August.
    2. Martínez-Zarzoso Inmaculada & Nowak-Lehmann Felicitas & Klasen Stephan & Johannsen Florian, 2016. "Does German Development Aid boost German Exports and German Employment? A Sectoral Level Analysis," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 236(1), pages 71-94, February.
    3. Inma Martínez-Zarzoso & F. D. Nowak-Lehmann & S. Klasen, 2017. "Aid and Its Impact on the Donor’s Export Industry: The Dutch Case," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 29(4), pages 769-786, August.
    4. Felicitas Nowak-Lehmann & Inmaculada Martínez-Zarzoso & Dierk Herzer & Stephan Klasen & Adriana Cardozo, 2013. "Does foreign aid promote recipient exports to donor countries?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 149(3), pages 505-535, September.
    5. Inmaculada Martinez-Zarzoso, 2019. "Effects of Foreign Aid on Income through International Trade," Politics and Governance, Cogitatio Press, vol. 7(2), pages 29-52.
    6. repec:bla:germec:v:10:y:2009:i::p:317-338 is not listed on IDEAS
    7. Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann & M. D. Parra & Stephan Klasen, 2014. "Does Aid Promote Donor Exports? Commercial Interest versus Instrumental Philanthropy," Kyklos, Wiley Blackwell, vol. 67(4), pages 559-587, November.
    8. Liu, Ailan & Tang, Bo, 2018. "US and China aid to Africa: Impact on the donor-recipient trade relations," China Economic Review, Elsevier, vol. 48(C), pages 46-65.
    9. Philipp H�hne & Birgit Meyer & Peter Nunnenkamp, 2014. "Who Benefits from Aid for Trade? Comparing the Effects on Recipient versus Donor Exports," Journal of Development Studies, Taylor & Francis Journals, vol. 50(9), pages 1275-1288, September.
    10. Barthel, Fabian & Neumayer, Eric & Nunnenkamp, Peter & Selaya, Pablo, 2014. "Competition for Export Markets and the Allocation of Foreign Aid: The Role of Spatial Dependence among Donor Countries," World Development, Elsevier, vol. 64(C), pages 350-365.
    11. Nowak-Lehmann D., Felicitas & Martínez-Zarzoso, Inmaculada & Cardozo, Adriana & Herzer, Dierk & Klasen, Stephan, 2011. "Does Aid translate into Bilateral Trade? Findings for Recipient Countries," Proceedings of the German Development Economics Conference, Berlin 2011 61, Verein für Socialpolitik, Research Committee Development Economics.
    12. Güzin Bayar, 2018. "Estimating export equations: a survey of the literature," Empirical Economics, Springer, vol. 54(2), pages 629-672, March.
    13. Katerina Gradeva & Inmaculada Martínez-Zarzoso, 2016. "Are Trade Preferences more Effective than Aid in Supporting Exports? Evidence from the ‘Everything But Arms’ Preference Scheme," The World Economy, Wiley Blackwell, vol. 39(8), pages 1146-1171, August.
    14. Savin, Ivan & Marson, Marta & Sutormina, Marina, 2020. "How different aid flows affect different trade flows: Evidence from Africa and its largest donors," Structural Change and Economic Dynamics, Elsevier, vol. 55(C), pages 119-136.
    15. Kruse, Hendrik W. & Martínez-Zarzoso, Inma, 2016. "Transfers in the gravity equation: The case of foreign aid," University of Göttingen Working Papers in Economics 288, University of Goettingen, Department of Economics.
    16. Anderson, James E. & Yotov, Yoto V., 2020. "Short run gravity," Journal of International Economics, Elsevier, vol. 126(C).
    17. Felicitas Nowak-Lehmann D. & Inmaculada Mart�nez-Zarzoso & Stephan Klasen & Dierk Herzer, 2009. "Aid and Trade - A Donor's Perspective," Journal of Development Studies, Taylor & Francis Journals, vol. 45(7), pages 1184-1202, August.
    18. Manders, Ton & Veenendaal, Paul, 2008. "Border tax adjustments and the EU-ETS - A quantitative assessment," Conference papers 331812, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    19. Minoiu, Camelia & Reddy, Sanjay G., 2010. "Development aid and economic growth: A positive long-run relation," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(1), pages 27-39, February.
    20. Guglielmo Maria Caporale & Christophe Rault & Robert Sova & Anamaria Sova, 2009. "Trade Specialisation and Economic Convergence: Evidence from Two Eastern European Countries," Discussion Papers of DIW Berlin 875, DIW Berlin, German Institute for Economic Research.
    21. Sierra-Fernández, Mª Del Pilar & Martínez-Campillo, Almudena, 2009. "Impacto del proceso de integración europea sobre las exportaciones de Castilla y León (1993-2007): un análisis econométrico a partir de la ecuación de gravedad/The Impact of the European Integration P," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 27, pages 783(34á)-78, Diciembre.

    More about this item

    Keywords

    International Trade; Foreign Aid; Germany;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F35 - International Economics - - International Finance - - - Foreign Aid

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:got:iaidps:227. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sabine Jaep (email available below). General contact details of provider: https://edirc.repec.org/data/ibgoede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.
    pFad - Phonifier reborn

    Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

    Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


    Alternative Proxies:

    Alternative Proxy

    pFad Proxy

    pFad v3 Proxy

    pFad v4 Proxy