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Does Foreign Aid Reduce Poverty? Empirical Evidence from Nongovernmental and Bilateral Aid

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Author Info
Boriana Yontcheva
Nadia Masud
Abstract

This paper assesses the effectiveness of foreign aid in reducing poverty through its impact on human development indicators. We use a dataset of both bilateral aid and NGO aid flows. Our results show that NGO aid reduces infant mortality and does so more effectively than official bilateral aid. The impact on illiteracy is less significant. We also test whether foreign aid reduces government efforts in achieving developmental goals and find mixed evidence of a substitution effect.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/100.

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Length: 31 pages
Date of creation: 01 Jun 2005
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Handle: RePEc:imf:imfwpa:05/100

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Keywords: Bilateral aid ; Multilateral aid ; Official Development assistance ; Poverty reduction ; Economic models ;

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This paper has been announced in the following NEP Reports: 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.:
  1. Tavares, Jose, 2003. "Does foreign aid corrupt?," Economics Letters, Elsevier, vol. 79(1), pages 99-106, April. [Downloadable!] (restricted)
  2. C-J. Dalgaard & H. Hansen, 2001. "On Aid, Growth and Good Policies," The Journal of Development Studies, Taylor and Francis Journals, vol. 37(6), pages 17-41, August. [Downloadable!] (restricted)
  3. Stephen Bond & Frank Windmeijer, 2002. "Finite Sample Inference for GMM Estimators in Linear Panel Data Models," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C6-3, International Conferences on Panel Data. [Downloadable!]
    Other versions:
  4. Robert Lensink & Howard White, 2000. "Aid allocation, poverty reduction and the Assessing Aid report," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 399-412.
  5. P. Guillaumont & L. Chauvet, 2001. "Aid and Performance: A Reassessment," The Journal of Development Studies, Taylor and Francis Journals, vol. 37(6), pages 66-92, August. [Downloadable!] (restricted)
  6. Svensson, Jakob, 2000. "Foreign aid and rent-seeking," Journal of International Economics, Elsevier, vol. 51(2), pages 437-461, August. [Downloadable!] (restricted)
  7. Mosley, Paul & Hudson, John & Horrell, Sara, 1987. "Aid, the Public Sector and the Market in Less Developed Countries," Economic Journal, Royal Economic Society, vol. 97(387), pages 616-41, September. [Downloadable!] (restricted)
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  15. Clark, John, 1995. "The state, popular participation, and the voluntary sector," World Development, Elsevier, vol. 23(4), pages 593-601, April. [Downloadable!] (restricted)
  16. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor and Francis Journals, vol. 19(3), pages 321-340. [Downloadable!] (restricted)
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  17. Pack, Howard & Pack, Janet Rothenberg, 1993. "Foreign Aid and the Question of Fungibility," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 258-65, May. [Downloadable!] (restricted)
  18. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February. [Downloadable!] (restricted)
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  20. Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2004. "On The Empirics of Foreign Aid and Growth," Economic Journal, Royal Economic Society, vol. 114(496), pages F191-F216, 06. [Downloadable!] (restricted)
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  21. Devarajan, Shantayanan & Swaroop, vinaya, 1998. "The implications of foreign aid fungibility for development assistance," Policy Research Working Paper Series 2022, The World Bank. [Downloadable!]
  22. Murshed, S Mansoob & Sen, Somnath, 1995. "Aid Conditionality and Military Expenditure Reduction in Developing Countries: Models of Asymmetric Information," Economic Journal, Royal Economic Society, vol. 105(429), pages 498-509, March. [Downloadable!] (restricted)
  23. Tsikata, Tsidi, 1998. "Aid Effectiveness - A Survey of the Recent Empirical Literature," IMF Papers on Policy Analysis and Assessments 98/1, International Monetary Fund. [Downloadable!]
  24. Alesina, Alberto & Dollar, David, 2000. " Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March. [Downloadable!] (restricted)
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  25. Michael Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting Chickens When They Hatch: The Short-term Effect of Aid on Growth," Working Papers 44, Center for Global Development. [Downloadable!]
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  26. Alexander Pivovarsky & Benedict J. Clements & Sanjeev Gupta & Erwin Tiongson, 2003. "Foreign Aid and Revenue Response: Does the Composition of Aid Matter?," IMF Working Papers 03/176, International Monetary Fund.
  27. Easterly, William, 1999. "The ghost of financing gap: testing the growth model used in the international financial institutions," Journal of Development Economics, Elsevier, vol. 60(2), pages 423-438, December. [Downloadable!] (restricted)
  28. Anna Fruttero & Varun Gauri, 2003. "Location decisions and nongovernmental organization motivation : evidence from rural Bangladesh," Policy Research Working Paper Series 3176, The World Bank. [Downloadable!]
  29. Paul Mosley & John Hudson & Arjan Verschoor, 2004. "Aid, Poverty Reduction and the 'New Conditionality'," Economic Journal, Royal Economic Society, vol. 114(496), pages F217-F243, 06. [Downloadable!] (restricted)
  30. Meyer, Carrie A., 1995. "Opportunism and NGOs: Entrepreneurship and green north-south transfers," World Development, Elsevier, vol. 23(8), pages 1277-1289, August. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Prachi Mishra & David Locke Newhouse, 2007. "Health Aid and Infant Mortality," IMF Working Papers 07/100, International Monetary Fund. [Downloadable!]
  2. Ma. Cecilia Calderón & Alberto Chong, 2006. "¿Contribuye la ayuda extranjera a reducir la desigualdad del ingreso?," RES Working Papers 4438, Inter-American Development Bank, Research Department. [Downloadable!]
  3. Koch, Dirk-Jan, 2007. "Blind Spots on the Map of Aid Allocations: Concentration and Complementarity of International NGO Aid," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  4. Ma. Cecilia Calderón & Alberto Chong, 2006. "Does Foreign Aid Help Reduce Income Inequality?," RES Working Papers 4437, Inter-American Development Bank, Research Department. [Downloadable!]
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