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Does Foreign Aid Help Reduce Income Inequality?

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  • Ma. Cecilia Calderón
  • Alberto Chong

    ()

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. Charles C. Chang & Eduardo Fernández-Arias & Luis Serven, 1998. "Measuring Aid Flows: A New Approach," Research Department Publications 4146, Inter-American Development Bank, Research Department.
  2. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
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  8. Hongyi Li & Lyn Squire & Heng-fu Zou, 1998. "Explaining International and Intertemporal Variations in Income Inequality," CEMA Working Papers 73, China Economics and Management Academy, Central University of Finance and Economics.
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  11. William Easterly & Ross Levine & David Roodman, 2003. "New Data, New doubts: A Comment on Burnside and Dollar's "Aid, Policies, and Growth" (2000)," NBER Working Papers 9846, National Bureau of Economic Research, Inc.
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  16. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  17. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
  18. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, vol. 55(4), pages 749-64, July.
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Cited by:
  1. Valerie Koechlin & Gianmarco Leon, 2007. "International Remittances and Income Inequality: An Empirical Investigation," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 10(2), pages 123-141.
  2. Christian Ebeke & Maëlan Le Goff, 2011. "Why Migrants' Remittances Reduce Income Inequality in some Countries and not in Others?," Working Papers halshs-00554277, HAL.

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