Comparative Advantage Following (CAF) development strategy, Aid for Trade flows and structural change in production

Abstract

Abstract This article investigates empirically the interaction between countries’ Comparative Advantage Following (CAF) development strategy and Aid for Trade (AfT) interventions in influencing the extent of structural change in production. Based on the Generalized Methods of Moments and an unbalanced panel dataset containing 81 countries over the period 1996–2016, the empirical exercise has shown that AfT flows are complementary with the CAF development strategy in generating a higher extent of structural change in production. Thus, higher amounts of AfT flows help promote structural change in production in countries that have adopted the CAF development strategy.