This paper investigates the impact of foreign aid on the economic structure of the recipient economy using a two-sector general equilibrium model. Underlying assumptions are designed to mirror a number of stylized facts about a group of South Pacific microstates known as MIRAB countries. Two variants of the model are constructed to reflect these countries' unequal access to overseas labor markets. Qualitative results reveal the likelihood of a structural transformation of the economy akin to that known as Dutch Disease, namely the relative contraction of the tradables sector. Quantitative results confirm the plausibility of this outcome.