Abstract � In this paper, we present an optimal two-sector growth model involving foreign aid as an input into the production function. We characterize the optimal resources allocation across sectors. Once calibrated, mainly, on Latin American countries, the model exhibits weak substitutability between aid and capital stock. Nonetheless, using numerical simulations, the model reproduces the main stylized facts outlined in the literature
To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.