Transfers and Transformations: Remittances, Foreign Aid, and Growth

Transfers include official development aid, private charitable donations, and personal remittances

• From: Foreign, Commonwealth & Development Office
• Published: 1 December 2014

• Document Type: Working Paper
• Theme: Economic Growth
• Authors: Temple, J, Ying, H, Carter, P

Abstract

For many developing countries, international transfers are now a significant source of income. These transfers include official development aid, private charitable donations, and personal remittances. This paper uses dynamic one-sector and multi-sector models to isolate conditions under which transfers could promote growth and structural transformation. Although transfers bring welfare benefits, the effects on investment and growth are modest under isoelastic utility; where investment is profitable, it would be undertaken even in the absence of transfers. Larger effects on growth and sectoral structure emerge when preferences take the Stone-Geary form, since then low investment can co-exist with high returns to investment.

Citation

Jonathan Temple, Huikang Ying, Patrick Carter, 2014. “Transfers and Transformations: Remittances, Foreign Aid, and Growth. Bristol Economics Discussion Papers 14/649, Department of Economics, University of Bristol, UK, revised 02 Dec 2014.

Links

Transfers and Transformations: Remittances, Foreign Aid, and Growth (PDF, 347KB)

Published 1 December 2014