ABSTRACT

This chapter provides a comparison of the social rate of return to the capital-exporting country on capital exported abroad with the social opportunity cost of foregoing the employment of the capital at home. Economic analysis of the real burden of aid on the donor countries has been stimulated mainly by policy considerations relating to the distribution of the aid burden among the major donors. In addition to reducing the aid burden, there are longer-term advantages to the exporting countries in keeping the price at the equilibrium level for a time and receiving a direct subsidy for the purpose of helping countries reallocate resources. A major concern of aid donors and of the Development Assistance Committee of the Organization for Economic Cooperation and Development has been the measurement of the relative aid burden and the determination of a formula for the equitable sharing of the aid burden among the major donors.