The Additionality Factor in Tied U.S. Development Assistance.

by Richard V.L. Cooper

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This study of the balance-of-payments effects of U.S. development aid estimates the "return" to the United States, in additional exports from aid recipients, on its development loans to 20 countries. "Additional" exports are those that would not have occurred without aid, as distinguished from exports resulting indirectly, through respending. Previous studies underestimated the additionality factor by defining additional exports narrowly, as only those financed by letter of credit. Here, a model of the recipient's importing pattern is devised in which U.S. exports to the recipient are a function of (1) what the recipient's total imports would have been without aid and (2) the amount of aid. The results show an additionality factor of more than 90 percent for the 1969 U.S. development loan program, much higher than previously estimated. (See also R-973, R-975.) 82 pp.

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