Choi, E. Kwan; Choi, Jai-Young

Theory and Practice of Foreign Aid, Volume 1 of Frontiers of Economics and Globalization, Amsterdam, Netherlands, (2007)

This paper investigates the role of infrastructure aid to developing countries beset with unemployment. Since unemployment persists in most developing countries with chronic foreign debts, the impact of infrastructure aid is analyzed using an extended Harris-Todaro model with two traded good sectors and a nontraded good sector. The paper delineates sufficient conditions under which infrastructure aid may lead to a Dutch Disease effect.