Optimal foreign aid and tariffs

This paper investigates the optimal choice of foreign aid when trade policies are decided in a non-cooperative fashion. Three alternative scenarios, depending on the timing of the actions and on whether aid is tied, are analyzed. It is shown that, in the case where aid is decided before tariffs, untied aid can lead to the reduction of the recipient's optimal trade tax. When the donor can tie the aid to a reduction in the recipient's tariff, the optimal aid level is always positive and the world can always achieve a Pareto-efficient equilibrium.

The politics of foreign aid: A median voter perspective

The paper presents a model where the median voter in the donor country determines the support of foreign aid. It is first established that an individual in the donor country is affected by the direct benefits (due to altruism) and costs (due to taxes) of giving aid, and by the indirect benefits or costs of a change in the terms of trade. Then it is shown that the latter effect works through changing both the donor country's average income and its distribution of income. Given the stylized facts of a capital-abundant donor country and relatively capital-poor median voter, it is shown how redistribution-of-income effects soften the impact of terms-of-trade changes on the political support for foreign aid.

Tied aid, unemployment and welfare

The effect of foreign aid on the welfare levels of both the recipient and the donor country has been a much analysed topic for research in both the theory of international trade and development economics. In the development economics literature, concerns have been raised since the 1960s on the possible adverse effect of foreign aid on domestic savings and growth.1 The trade theory literature in this respect is much older and dates back to the 1920s when Professors Keynes and Ohlin debated on the effect of foreign aid on international terms of trade.2 Ever since, the terms of trade effect has been the cornerstone in the analysis of the welfare effect of foreign aid in the trade theory literature.3 After some early confusion, it is now well established that in a Walrasian stable world economy with two countries, a necessary condition for foreign aid to have perverse effects is that there is some distortion in either of the two countries.4 It is also known that, under normality and substitutability of goods, untied aid cannot be strictly Pareto-improving in a tariff distorted world.5

Welfare effects of aid under quantitative trade restrictions

The paper examines the effects of tied-aid on the welfare of both the donor and the recipient countries. We depart from the previous literature by assuming preexistence of quantitative trade distortions. To mitigate these distortions the donor country provides aid that is tied to the rationed good. Conditions for the presence of the transfer paradox and of the enrichment of both countries are derived and interpreted under the stability of the system. Furthermore, we show that whereas untied aid cannot increase global welfare, tied-aid unambiguously does so.

Lowering grain boundary resistance of BaZr0.8Y0.2O3−δ with LiNO3 sintering-aid improves proton conductivity for fuel cell operation

A novel sintering additive based on LiNO3 was used to overcome the drawbacks of poor sinterability and low grain boundary conductivity in BaZr0.8Y0.2O3-δ (BZY20) protonic conductors. The Li-additive totally evaporated during the sintering process at 1600°C for 6 h, which led to highly dense BZY20 pellets (96.5% of the theoretical value). The proton conductivity values of BZY20 with Li sintering-aid were significantly larger than the values reported for BZY sintered with other metal oxides, due to the fast proton transport in the "clean" grain boundaries and grain interior. The total conductivity of BZY20-Li in wet Ar was 4.45 × 10-3 S cm-1 at 600°C. Based on the improved sinterability, anode-supported fuel cells with 25 μm-thick BZY20-Li electrolyte membranes were fabricated by a co-firing technique. The peak power density obtained at 700°C for a BZY-Ni/BZY20-Li/La0.6Sr0.4Co0.2Fe 0.8O3-δ (LSCF)-BZY cell was 53 mW cm-2, which is significantly larger than the values reported for fuel cells using electrolytes made of BZY sintered with the addition of ZnO and CuO, confirming the advantage of using Li as a sintering aid.