Aid for trade and tourism in aid-recipient countries

Using a sample of 32 countries, we examine the effect of aid for trade (AfT) on tourism in aid beneficiaries over 2002-2019. Our investigation reveals that AfT supports tourism receipts in aid recipients. Specifically, two AfT categories are positively associated with tourism receipts in AfT recipients: AfT targeting infrastructure and AfT addressing trade policy, with a larger effect of the former. Furthermore, our analysis reveals the following: (i) total AfT and each of its components have a significant effect among lower-middle-income countries; (ii) total AfT and each of its categories – except AfT targeting productive capacities – have a significant effect in upper-middle-income countries; (iii) typically, the impact of AfT is larger in lower-middle-income countries. Our study is the first to establish such relationships between AfT and tourism in recipients. Our analysis supports the recent desire expressed by donors/recipients to increase AfT targeting tourism and highlights several policy recommendations.