PARADOXES ASSOCIATED WITH THE ADMINISTRATION OF FOREIGN-AID

This paper shows that if because of administration costs or other wast es only a proportion of an aid reaches the recipient, then it is possi ble that the donor is enriched by its act of charity, the extent of th e enrichment increasing with the extent of the leakage, and/or that th e recipient is impoverished by aid, the extent of the impoverishment i ncreasing with the extent of the leakage. These outcomes are possible even when trade is optimally restricted by donor or recipient.