The purpose of this project is to isolate and analyze the economic consequences of the Marshall Plan. Remarkably enough, there does not exist a single, systematic study analyzing the economic impact of the Marshall Plan, despite the fact it was one of the great successes of American foreign policy in restoring the economic strength of Europe after World War II. This research is particularly timely given the break up of the Soviet Empire and the current debate about how best to construct an economic assistance program by the Western Democracies. The findings of this project could provide useful insights as to how an aid program might be structured. Specifically, the project will take three approaches to analyzing the impact on economic growth of U.S. aid to Europe after World War II. The first, an aggregate approach, will develop an analytic framework that takes as its point of departure the two- gap literature in development economics. An empirical model of the channels through which the Marshall Plan affected aggregate output growth will be developed and estimated for the period 1945 to 1955. The second is a sectorial approach which will use input-output tables and data on aid-financed commodity imports to assess the role of the Marshall Plan in removing sectorial bottlenecks. The third is political economy approach which will develop and use models of collective decision-making to analyze the allocation of U.S. aid.
