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Thresholds in Aid Effectiveness

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  • Laurent Wagner

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

Abstract

Is the big push hypothesis consistent with capacity constraints in the study of aid effectiveness? Big push hypothesis suggests the existence of a minimum threshold below which aid is not effective, while the constraints referred to by the concept of absorptive capacity suggests the existence of another threshold above which aid is no longer effective. This paper addresses the issue of multiple thresholds characterizing the aid/growth relationship. Using a semiparametric econometric method we do find that aid become effective only above a critical level but also become detrimental to growth for higher value of aid flows. We also investigate how the quality of economic policies and vulnerability modifies the level of those two thresholds. We finally propose a dynamic explanation of the aid/growth relationship.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00556696.

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Date of creation: 17 Jan 2011
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Handle: RePEc:hal:wpaper:halshs-00556696

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00556696/en/
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Related research

Keywords: economic growth; aid effectiveness; Threshold Models; Semiparametric Regressions;

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Cited by:
  1. Patrick GUILLAUMONT & Laurent WAGNER, 2014. "Aid effectiveness for poverty reduction: lessons from cross-country analyses, with a special focus on vulnerable countries," Working Papers P96, FERDI.
  2. Patrick GUILLAUMONT, 2009. "Aid effectiveness for poverty reduction: macroeconomic overview and emerging issues," Working Papers P05, FERDI.
  3. Patrick Guillaumont, 2011. "Aid effectiveness for poverty reduction:macroeconomic overview and emerging issues," Working Papers halshs-00554285, HAL.
  4. Patrick GUILLAUMONT, 2009. "Aid effectiveness for poverty reduction: macroeconomic overview and emerging issues," Working Papers P05, FERDI.
  5. Guillaumont, Patrick & Wagner, Laurent, 2012. "Aid and Growth Accelerations: Vulnerability Matters," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  6. Bah, El-hadj M. & Ward, Jeremy, 2011. "Effectiveness of foreign aid in Small Island Developing States," MPRA Paper 32062, University Library of Munich, Germany.

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