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Does Foreign Aid Help Reduce Income Inequality?

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  • Ma. Cecilia Calderón
  • Alberto Chong

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Abstract

The aim of this paper is to provide empirical evidence on the link between foreign aid and income inequality for the period 1973-2002. Since simple cross-country regressions cannot be taken as `true` time series findings, we also focus on dynamic panel data techniques, which allow accounting for potential simultaneity and heterogeneity problems. We do not find very robust evidence that foreign aid is conducive to the improvement of the distribution of income, even when the quality of institutions is taken into account. This finding is consistent with recent empirical research on aid and growth that shows that such a link is weak at best.

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Bibliographic Info

Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 4437.

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Date of creation: Mar 2006
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Handle: RePEc:idb:wpaper:4437

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  1. Chang, Charles C. & Fernandez-Arias, Eduardo & Serven, Luis, 1999. "Measuring aid flows : a new approach," Policy Research Working Paper Series 2050, The World Bank.
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  16. Boriana Yontcheva & Nadia Masud, 2005. "Does Foreign Aid Reduce Poverty? Empirical Evidence From Nongovernmental and Bilateral Aid," IMF Working Papers 05/100, International Monetary Fund.
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Cited by:
  1. Maëlan LE GOFF & Christian EBEKE, 2009. "Why Migrants' Remittances Reduce Income Inequality in some Countries and not in Others?," Working Papers 200919, CERDI.
  2. Valerie Koechlin & Gianmarco Leon, 2007. "International Remittances and Income Inequality: An Empirical Investigation," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 10(2), pages 123-141.

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