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Big Push versus Absorptive Capacity: How to Reconcile the Two Approaches

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Author Info
Guillaumont, Patrick
Guillaumont Jeanneney, Sylviane

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Abstract

In this paper we examine whether absorptive capacity can constitute sufficient justification for rejecting the proposal of a large aid increase to support the ?big push?. We argue that the probability of a poverty trap exists for many countries, in particular the least developed countries (LDCs) and that an increase in aid is relevant for them. Moreover we show that the decrease in marginal aid returns is slower in vulnerable countries, which supports the rationale to include vulnerability as one of the aid allocation criteria. We examine the main obstacles to absorptive capacity, such as disbursement constraints and short-term bottlenecks, macroeconomic problems, including loss in competitiveness and macroeconomic volatility, as well as the weakening of institutions. The general conclusion that we draw for reconciling the two approaches is that absorptive capacity strongly influenced by aid itself or by its modalities. The big push and absorptive capacity approaches cannot be reconciled without aid reform supported by an aid increase. First, what is needed is to balance the utilization of aid between activities that are directly productive and those that are social ...

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Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Papers with number UNU-WIDER Research Paper DP2007/05.

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Length: 26 pages
Date of creation: 2007
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Handle: RePEc:unu:wpaper:dp2007-05

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Related research
Keywords: absorptive capacity; big push; aid effectiveness; poverty trap; institutions;

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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.:
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  2. Jacky Amprou & Patrick Guillaumont & Sylviane Guillaumont Jeanneney, 2007. "Aid Selectivity According to Augmented Criteria," The World Economy, Blackwell Publishing, vol. 30(5), pages 733-763, 05. [Downloadable!] (restricted)
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  3. C. Henry, 2005. "The end of poverty: How we can make it happen in our lifetime," The Review of Black Political Economy, Springer, vol. 33(2), pages 61-68, December. [Downloadable!] (restricted)
  4. Isham, Jonathan & Kaufmann, Daniel & Pritchett, Lant H, 1997. "Civil Liberties, Democracy, and the Performance of Government Projects," World Bank Economic Review, Oxford University Press, vol. 11(2), pages 219-42, May.
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  6. Christopher S. Adam & David L. Bevan, 2006. "Aid and the Supply Side: Public Investment, Export Performance, and Dutch Disease in Low-Income Countries," World Bank Economic Review, Oxford University Press, vol. 20(2), pages 261-290.
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  7. Kasekende, L A & Atingi-Ego, M, 1999. "Uganda's Experience with Aid," Journal of African Economies, Oxford University Press, vol. 8(4), pages 617-49, December.
  8. Arellano, Cristina & Bulír, Ales & Lane, Timothy & Lipschitz, Leslie, 2009. "The dynamic implications of foreign aid and its variability," Journal of Development Economics, Elsevier, vol. 88(1), pages 87-102, January. [Downloadable!] (restricted)
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  9. Griffin, Keith, 1970. "Foreign Capital, Domestic Savings and Economic Development," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 32(2), pages 99-112, May.
  10. Jonathan Isham & Daniel Kaufmann, 1999. "The Forgotten Rationale For Policy Reform: The Productivity Of Investment Projects," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 149-184, February. [Downloadable!] (restricted)
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  11. Craig Burnside & David Dollar, 2004. "Aid, Policies, and Growth: Reply," American Economic Review, American Economic Association, vol. 94(3), pages 781-784, June. [Downloadable!]
  12. Pallage, Stephane & Robe, Michel A, 2001. "Foreign Aid and the Business Cycle," Review of International Economics, Blackwell Publishing, vol. 9(4), pages 641-72, November. [Downloadable!] (restricted)
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  13. Todd Moss & Gunilla Pettersson & Nicolas van de Walle, 2006. "An Aid-Institutions Paradox? A Review Essay on Aid Dependency and State Building in Sub-Saharan Africa," Working Papers 74, Center for Global Development. [Downloadable!]
  14. Peter S. Heller, 2005. "Pity the Finance Minister: Issues in Managing a Substantial Scaling-Up of Aid Flows," IMF Working Papers 05/180, International Monetary Fund. [Downloadable!]
  15. Pierre-Richard Agénor & Nihal Bayraktar & Emmanuel Pinto Moreira & Karim El Aynaoui, 2006. "Achieving the Millennium Development Goals in Sub-Saharan Africa: A Macroeconomic Monitoring Framework," The World Economy, Blackwell Publishing, vol. 29(11), pages 1519-1547, November. [Downloadable!] (restricted)
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  16. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September. [Downloadable!] (restricted)
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  17. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April. [Downloadable!] (restricted)
  18. Kraay, Aart & Raddatz, Claudio, 2005. "Poverty traps, aid, and growth," Policy Research Working Paper Series 3631, The World Bank. [Downloadable!]
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  19. R. Lensink & H. White, 2001. "Are There Negative Returns to Aid?," The Journal of Development Studies, Taylor and Francis Journals, vol. 37(6), pages 42-65, August. [Downloadable!] (restricted)
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  20. Author-Name: Jeffrey D. Sachs & John W. McArthur & Guido Schmidt-Traub & Margaret Kruk & Chandrika Bahadur & Michael Faye & Gordon McCord, 2004. "Ending Africa's Poverty Trap," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(2004-1), pages 117-240. [Downloadable!]
  21. George Mavrotas, 2005. "Aid heterogeneity: looking at aid effectiveness from a different angle," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(8), pages 1019-1036. [Downloadable!]
Full references

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. George Mavrotas & Bazoumana Ouattara, 2007. "Aid Modalities and Budgetary Response: Panel Data Evidence," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 143(4), pages 720-741, December. [Downloadable!] (restricted)
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