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The effects of aid on EU employment and trade: an econometric investigation

Working paper

Written by Maximiliano Mendez-Parra, Dirk Willem te Velde

Working paper

The European Union (EU) is the most generous overseas aid donor in the world. That EU aid can effectively enhance productivity, trade and growth in recipient countries has been extensively documented; what has been less so is the impact that the giving of development assistance can have on the economies of donor countries. 

This working paper is an extensive investigation of the impact that EU overseas aid has on exports and employment in EU member states. Using econometric techniques, this paper postulates that even untied aid can, and has, increased the volume of exports from donor countries, increasing export revenue and generating donor-country jobs. It is found that for every $1 the EU spends in aid, EU exports will expand by between $1.02 and $3.69, meaning that average annual aid spend by the EU sustains around 141,000 jobs, or 0.06% of the EU workforce.  

Maximiliano Mendez-Parra and Dirk Willem te Velde