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Halving Poverty by Doubling Aid: Is There Reason for Optimism?

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  • Rolf J. Langhammer

Abstract

This paper criticises the World Bank as overly optimistic with respect to its ability to fine-tune development aid and to focus it on countries with 'good' policies rather than on countries with 'poor' policies in order to raise its effectiveness. It is shown that recipient regions showed very different patterns of aid inflows and economic growth in the past and that aid flows yielded the highest correlation to growth when their magnitudes shrank. It is furthermore argued that categorising countries by quality of domestic policies is not only questionable at a given point of time especially in countries with failing governmental institutions and open borders as in many African countries. It suffers also from incentive problems so that countries receiving more aid can become victims of changes in their domestic policies which are more permissive and etatist to the disadvantage of private agents. The paper instead pleads for a shift to aid policies decoupled from country-specifics and more oriented to fundamental 'beyond border' problems of the well-being of the poor. An international endowment fund under supranational law should finance research and implementation of research findings related to common international goods as it was suggested by Sachs concerning aids and tropical disease research. Copyright Blackwell Publishing Ltd 2004.

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  • Rolf J. Langhammer, 2004. "Halving Poverty by Doubling Aid: Is There Reason for Optimism?," The World Economy, Wiley Blackwell, vol. 27(1), pages 81-98, January.
  • Handle: RePEc:bla:worlde:v:27:y:2004:i:1:p:81-98
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    Cited by:

    1. Canavire-Bacarreza, Gustavo & Nunnenkamp, Peter & Thiele, Rainer & Triveño, Luis, 2005. "Assessing the allocation of aid: Developmental concerns and the self-interest of donors," Kiel Working Papers 1253, Kiel Institute for the World Economy (IfW).
    2. Pincin, Jared, 2012. "Foreign aid and political influence of the development assistance committee countries," MPRA Paper 39668, University Library of Munich, Germany.
    3. Axel Dreher & Peter Nunnenkamp & Rainer Thiele, 2008. "Does US aid buy UN general assembly votes? A disaggregated analysis," Public Choice, Springer, vol. 136(1), pages 139-164, July.
    4. Arslan, Aslihan & Taylor, J.Edward, 2009. "Farmers' Subjective Valuation of Subsistence Crops: The Case of Traditional Maize in Mexico," American Journal of Agricultural Economics APPENDICES, Agricultural and Applied Economics Association, vol. 0(Number 4), pages 1-4, April.
    5. Philipp Harms & Matthias Lutz, 2004. "The Macroeconomic Effects of Foreign Aid: A Survey," University of St. Gallen Department of Economics working paper series 2004 2004-11, Department of Economics, University of St. Gallen.
    6. Peter Nunnenkamp & Rainer Thiele, 2006. "Targeting Aid to the Needy and Deserving: Nothing But Promises?," The World Economy, Wiley Blackwell, vol. 29(9), pages 1177-1201, September.
    7. Lin, Tun & Mavrotas, George, 2004. "A Contract Perspective on the International Finance Facility," WIDER Working Paper Series 060, World Institute for Development Economic Research (UNU-WIDER).

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