The Link between Official Development Assistance and International Trade Flows – Insights from Economic Theory

Abstract

As noted in many studies of development aid there are many reasons why one might expect to observe a correlation between aid and trade flows from a donor to a particular recipient. The paper firstly presents Bulgarian participation in development cooperation to disclose the motivation for studying the relation between aid and trade. The main section summarises some insights from economic theory literature on the rationale and the potential economic gains of development assistance donors as well as the findings of a number of studies analysing the existence, direction and strength of the linkage between the dynamics and volume of development aid and international trade flows. The last section outlines the author’s intentions for a future own study on this correlation.