The Trade Effect of Aid for Trade in Sub Saharan Africa. Are Donors Self-Interested?

Abstract

Sub Saharan African (SSA) countries are facing severe economic challenges such as high trade costs, poor trade performance and low growth levels. As a result development assistance is needed to overcome these difficulties. SSA countries receive the highest share of Aid for Trade (AfT) and therefore it is important to assess the effects of AfT. This study investigates the trade effect of AfT on trade and whether it generates more exports of donors or exports of recipients. In addition, different institutional settings of recipient countries are taken into account. The main finding suggests that AfT works better in an environment where the recipient country’s government operates effectively. Moreover, the results of this study cannot provide evidence for the pessimistic view of self-interested donors.

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