Aid for trade as a public good

Abstract

Aid for trade (A4T) can be classified as a public good. In the case of more than two donors, independent bilateral provision of A4T must be insufficient. This article suggests that international organisations can be a solution to insufficient A4T. However, those international organisations must adopt new methods of coordinating donors and recipients as well as a cost-sharing rule based on the share of benefit can help.

Keywords:

• Aid for trade
• public goods
• international organisations

JEL Classifications:

• H41
• F35
• F55

Acknowledgements

The author is grateful to the comments by Shih-Jye Wu, Chris Y. Tung, Tru-Gin Liu and two anonymous referees. The author thanks comments from two anonymous referees.

Notes

1. The EIF is a mechanism of coordinating the A4T from six agencies and other donors to LDCs. The six agencies include WTO, World Bank, IMF, UNCTAD, ITC and UNDP.

2. Adequate parameters of production technology can ensure that equation (1) holds. In addition, other trade pattern will not change the insight of the model.

3. Please refer to World Bank (2009).

4. 

The second-order condition also satisfies.

5. w is decreasing in t.

6. 

The second-order condition can be satisfied when L_{N 1}−t ₁ = L_{N 2}−t ₂. Hence, t_i solved by equation (10) can reach the maximum as long as the condition for the internal solution is satisfied. To simplify the analysis, only internal solutions are considered.

7. In the case of private provision without any designed rule set in advance, a larger N-type economy will still choose a larger amount of A4T. However, the provision is not sufficient.

8. Basically, the calculation of membership fee is based on the trade share in the last 3 years. However, members whose trade share is below 0.015% pay a fixed amount.