Advanced Search
MyIDEAS: Login

Aid dependence reconsidered

Contents:

Author Info

  • Jean-Paul Azam
  • Shantayanan Devarajan
  • Stephen A. O'Connell

Abstract

If foreign aid undermines institutional development, aid recipients can exhibit the symptoms of “dependence”-a short-run benefit from aid, but increasing need for aid that is damaging in the long run. We show that this high-aid/weakinstitutions state can be an equilibrium outcome even when donors and recipients fully anticipate the effect of aid on institutional development. However, a lowaid/ strong-institutions outcome is also possible, so that the model encompasses the diverse foreign-aid experiences of countries like the Republic of Korea and Tanzania. When the development community ignores the effect of aid on institutions, the outcome depends strongly on initial conditions. Where institutions are already weak, institutional capacity collapses and foreign aid eventually finances the entire public budget. Where they are initially stronger, the result can be close to the institutionssensitive equilibrium. The results suggest that foreign aid strategies, even for countries with similar per capita incomes, should be differentiated according to their institutional capacity; and that a short-run reduction in aid may increase a country’s chances of graduating from aid.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.csae.ox.ac.uk/workingpapers/pdfs/9905text.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 1999-05.

as in new window
Length:
Date of creation: 1999
Date of revision:
Handle: RePEc:csa:wpaper:1999-05

Contact details of provider:
Postal: Manor Road, Oxford, OX1 3UQ
Phone: +44-(0)1865 271084
Fax: +44-(0)1865 281447
Email:
Web page: http://www.csae.ox.ac.uk/
More information through EDIRC

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Bruton, H.J., 1998. "A Reconsideration of Import Substitution," Center for Development Economics 156, Department of Economics, Williams College.
  2. Henry J. Bruton, 1998. "A Reconsideration of Import Substitution," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 903-936, June.
  3. Kent P. Kimbrough, 1986. "Foreign Aid and Optimal Fiscal Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 19(1), pages 35-61, February.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Öhler, Hannes & Nunnenkamp, Peter & Dreher, Axel, 2010. "Does conditionality work? A test for an innovative US aid scheme," Center for European, Governance and Economic Development Research Discussion Papers 103, University of Goettingen, Department of Economics.
  2. Knack, Stephen, 2013. "Aid and donor trust in recipient country systems," Journal of Development Economics, Elsevier, vol. 101(C), pages 316-329.
  3. O'Connell, Stephen A. & Soludo, Charles C., 2001. "Aid Intensity in Africa," World Development, Elsevier, vol. 29(9), pages 1527-1552, September.
  4. Godfrey, Martin & Sophal, Chan & Kato, Toshiyasu & Vou Piseth, Long & Dorina, Pon & Saravy, Tep & Savora, Tia & Sovannarith, So, 2002. "Technical Assistance and Capacity Development in an Aid-dependent Economy: The Experience of Cambodia," World Development, Elsevier, vol. 30(3), pages 355-373, March.
  5. Gnangnon, Sèna Kimm, 2014. "The Effect of Development Aid Unpredictability and Migrants’ Remittances on Fiscal Consolidation in Developing Countries," World Development, Elsevier, vol. 54(C), pages 168-190.
  6. Feeny, Simon, 2007. "Foreign Aid and Fiscal Governance in Melanesia," World Development, Elsevier, vol. 35(3), pages 439-453, March.
  7. Knack, Stephen & Rahman, Aminur, 2004. "Donor fragmentation and bureaucratic quality in aid recipients," Policy Research Working Paper Series 3186, The World Bank.
  8. Stephen A. O'Connell & Charles C. Soludo, 1999. "Aid intensity in Africa," CSAE Working Paper Series 1999-03, Centre for the Study of African Economies, University of Oxford.
  9. Bandeira, Pablo, 2009. "El desarrollo institucional en el contexto de la ineficacia de la ayuda: ¿qué podemos hacer?
    [Promoting institutional development in the context of actual aid ineffectiveness: what can we do?]
    ," MPRA Paper 13372, University Library of Munich, Germany.
  10. Knack, Stephen, 2012. "When do donors trust recipient country systems ?," Policy Research Working Paper Series 6019, The World Bank.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:csa:wpaper:1999-05. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Richard Payne).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.