International Trade Working Paper

The International Trade Working Paper series promptly documents and disseminates reviews, analytical work and think-pieces to facilitate the exchange of ideas and to stimulate debates and discussions on issues that are of interest to developing countries in general and Commonwealth members in particular. The issues considered in the papers may be evolving in nature, leading to further work and refinement at a later stage.


How Has Aid for Trade Influenced the Likelihood of Graduation from Least Developed Country Status?

Several econometric techniques with different degrees of sophistication have been used to assess the impact of Aid for Trade (AfT) on trade and other economic performance in recipient countries, especially at the macro level, not all of which have proved conclusive. However, this line of enquiry has not been pursued in relation to whether AfT disbursed to Least Developed Countries (LDCs) has resulted in an increased likelihood of graduation. We therefore explore the relationship between AfT expenditures and the likelihood of graduation from LDC status. Total AfT disbursements per capita to those LDCs unlikely to graduate by 2021 have been constantly higher compared to LDCs likely to graduate by 2021 in recent years. However, disbursements to LDCs likely to graduate have tended to focus on specific sectors, such as communications, business and other services, which have significantly influenced the likelihood of graduation. These sectors have significantly interacted with others, notably agriculture, tourism and mining. These results, related to structural economic transformation within and between sectors, deserve further attention related to stimulating graduation with momentum.


Keywords: Aid for Trade, least developed countries, graduation, trade performance
JEL: F35: International Economics / International Finance / Foreign Aid; F1: International Economics / Trade; O24: Economic Development, Innovation, Technological Change, and Growth / Development Planning and Policy / Development Planning and Policy: Trade Policy; Factor Movement; Foreign Exchange Policy
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