ABSTRACT
This chapter considers official foreign aid as a transfer of real resources or immediate claims on resources from one country to another. Aid in the form of international price-support programs for the products of developing countries is, in effect, financed by a tax on consumers in the importing countries. The amount of the aid transfer may be regarded as equal to the increase in total revenues arising from the increase in the administered price over the price which would have prevailed in the absence of administrative controls. Aid transfers arise from discriminatory treatment only in cases where the preference-receiving country receives a price for its product higher than the free-market world price that would exist in the absence of all restrictions on the part of the preference-giving country. A substantial proportion of total aid transfers takes the form of government-guaranteed private loans, export credits, and direct investments.
