Aid for Trade, Foreign Direct Investment and Export Upgrading in Recipient Countries

Sèna Kimm Gnangnon · Michael T. Roberts

49 citations0/0 files storedJournal of International Commerce Economics and Policy

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Global trade and economics International Development and Aid Economic and Technological Innovation

Abstract

This paper examines empirically whether Aid for Trade (AfT) programs and Foreign Direct Investment (FDI) inflows affect export upgrading and, if so, whether their effects are complementary or substitutable. The empirical analysis suggests that AfT and FDI do affect export upgrading, namely export diversification and export quality improvement. Moreover, there is a significant interplay between these two financial flows in affecting export upgrading in recipient countries. The importance of this interplay should be taken into account by policymakers of recipient countries when they are devising both export development strategies and policies/institutions that affect FDI inflows into their countries.

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