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Aid, Investment and Incentives


  • Pedersen, Karl R


Promoting productive investment and economic growth are among the key objectives of most aid organizations operating in poor countries. However, it is not possible to conclude from existing empirical evidence that aid contributes positively to growth. In this paper, it is shown that those rather negative results may be explained by important incentive problems built into the aid system itself. The recipient countries' own efforts to contribute to investment and growth may, in reality, be undermined and the result may be aid dependency. Copyright 1996 by The editors of the Scandinavian Journal of Economics.

Suggested Citation

  • Pedersen, Karl R, 1996. " Aid, Investment and Incentives," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(3), pages 423-438.
  • Handle: RePEc:bla:scandj:v:98:y:1996:i:3:p:423-38

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    References listed on IDEAS

    1. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-334, June.
    2. Hendry, David F, 1985. "Monetary Economic Myth and Econometric Reality," Oxford Review of Economic Policy, Oxford University Press, vol. 1(1), pages 72-84, Spring.
    3. Sargan, John Denis & Bhargava, Alok, 1983. "Testing Residuals from Least Squares Regression for Being Generated by the Gaussian Random Walk," Econometrica, Econometric Society, vol. 51(1), pages 153-174, January.
    4. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    5. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    6. Spanos, Aris, 1989. "On Rereading Haavelmo: A Retrospective View of Econometric Modeling," Econometric Theory, Cambridge University Press, vol. 5(03), pages 405-429, December.
    7. Jarque, Carlos M. & Bera, Anil K., 1980. "Efficient tests for normality, homoscedasticity and serial independence of regression residuals," Economics Letters, Elsevier, vol. 6(3), pages 255-259.
    8. A. R. Pagan & A. D. Hall & P. K. Trivedi, 1983. "Assessing the Variability of Inflation," Review of Economic Studies, Oxford University Press, vol. 50(4), pages 585-596.
    9. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-472, June.
    10. White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, vol. 50(1), pages 1-25, January.
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