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Egalitarian aid. The impact of aid on Latin American inequality

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  • González, Mariano
  • Larrú, José María

Abstract

Literature on the relationship between aid and inequality is scarce and contradictory. Most studies are based on dynamic panel data using internal instruments to deal with endogeneity. In addition to these techniques, this article introduces the persistency of inequality and a double-censored Gini index. We apply for the first time a dynamic and double-censored panel data estimated applying the Simulated Maximum Likelihood method to a sample of 18 Latin American countries for 1990-2008. The main findings are that public expenditure in consumption and foreign direct investment had a positive effect on inequality whereas aid had a negative (egalitarian) effect. Neither taxes nor public social spending had a significant effect on inequality.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 41660.

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Date of creation: May 2012
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Handle: RePEc:pra:mprapa:41660

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Keywords: dynamic panel data; double censored panel data; inequality; foreign aid; Latin America;

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