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Aid Effectiveness for Poverty Reduction: Lessons from Cross‑country Analyses, with a Special Focus on Vulnerable Countries

Author

Listed:
  • Patrick Guillaumont
  • Laurent Wagner

Abstract

Cross?country econometric studies of aid effectiveness are numerous and often criticized. Relying on results of those which seem the most relevant and robust, this paper argues that aid is leading to poverty reduction, in particular in vulnerable countries. It examines the main methodological challenges faced by these studies, related to the definition aid, to its endogeneity, to the heterogeneity of the country features conditioning its effectiveness, to its variable returns, to the time dynamics of this effectiveness. Three main channels by which aid may influence the poverty levels are considered: the economic growth, the public social expenditures, and the macroeconomic stabilizing impact, interrelated with the two other channels. The stabilizing impact of aid has a major influence on poverty reduction, which cannot be evidenced without cross country analyses. JEL Classification: F35, O11, O40, C21, I3.

Suggested Citation

  • Patrick Guillaumont & Laurent Wagner, 2014. "Aid Effectiveness for Poverty Reduction: Lessons from Cross‑country Analyses, with a Special Focus on Vulnerable Countries," Revue d’économie du développement, De Boeck Université, vol. 22(HS01), pages 217-261.
    • Handle: RePEc:cai:edddbu:edd_hs01_0217
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    Cited by:

    1. Gnangnon, Sèna Kimm, 2020. "Aid for Trade flows and Poverty Reduction in Recipient-Countries," EconStor Preprints 213807, ZBW - Leibniz Information Centre for Economics.
    2. Sebastian Edwards, 2015. "Economic Development and the Effectiveness of Foreign Aid: A Historical Perspective," Kyklos, Wiley Blackwell, vol. 68(3), pages 277-316, August.
    3. Pham, Ngoc-Sang & Pham, Thi Kim Cuong, 2020. "Effects of foreign aid on the recipient country’s economic growth," Journal of Mathematical Economics, Elsevier, vol. 86(C), pages 52-68.
    4. Magdalena Proczek & Ewa Osuch-Rak, 2021. "The Effectiveness of Development Aid – EU as a Leader?," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 2), pages 583-600.
    5. Ngoc-Sang Pham & Thi Kim Cuong Pham, 2019. "Foreign aid, recipient government's fiscal behavior, and economic growth," Economics Bulletin, AccessEcon, vol. 39(4), pages 2457-2466.
    6. Joseph Olarewaju Afolabi & Justine Tochukwu Nwanekwere, 2019. "Macroeconomic Effect of Foreign Aid," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 6(2), pages 197-204.
    7. Isaac Doku, 2022. "Are Developing Countries Using Climate Funds for Poverty Alleviation? Evidence from Sub-Saharan Africa," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(6), pages 3026-3049, December.
    8. Munyanyi, Musharavati Ephraim & Awaworyi Churchill, Sefa, 2022. "Foreign aid and energy poverty: Sub-national evidence from Senegal," Energy Economics, Elsevier, vol. 108(C).
    9. Djedje Hermann YOHOU & Michaël GOUJON & Bertrand LAPORTE & Samuel GUERINEAU, 2016. "Is Aid Unfriendly to Tax? African Evidence of Heterogeneous Direct and Indirect Effects," Working Papers 201608, CERDI.
    10. Ngoc-Sang PHAM & Thi Kim Cuong PHAM, 2017. "Economic growth and escaping the poverty trap: how does development aid work?," Working Papers P197, FERDI.
    11. Cuong Le Van & Ngoc-Sang Pham & Thi Kim Cuong Pham, 2021. "Development loans, poverty trap, and economic dynamics," Working Papers halshs-03456281, HAL.
    12. Le Van, Cuong & Pham, Ngoc-Sang & Pham, Thi Kim Cuong, 2023. "Effects of development aid (grants and loans) on the economic dynamics of the recipient country," Mathematical Social Sciences, Elsevier, vol. 125(C), pages 101-112.
    13. Patrick Guillaumont & Sylviane Guillaumont Jeanneney & Laurent Wagner, 2021. "How to Allocate New External Financing to African Countries? The Vulnerability Challenge. A Briefing in Response to the Paris Summit on Financing African Economies [Comment allouer les financements," Post-Print hal-03218024, HAL.
    14. Wells Thomas R., 2019. "Just End Poverty Now: The Case for a Global Minimum Income," Basic Income Studies, De Gruyter, vol. 14(2), pages 1-13, December.
    15. Chang, Shinhye & Gupta, Rangan & Miller, Stephen M. & Wohar, Mark E., 2019. "Growth volatility and inequality in the U.S.: A wavelet analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 521(C), pages 48-73.
    16. Mehadi Mamun, 2021. "The Impact of Foreign Aid Conditionality on Poverty Alleviation in Bangladesh: A Recipient’s Perspective," Business and Economic Research, Macrothink Institute, vol. 11(3), pages 151-161, December.
    17. Chapel, Capucine, 2022. "Impact of official development assistance projects for renewable energy on electrification in sub-Saharan Africa," World Development, Elsevier, vol. 152(C).
    18. Edmore MAHEMBE & Nicholas M. ODHIAMBO, 2017. "On The Link Between Foreign Aid And Poverty Reduction In Developing Countries," Revista Galega de Economía, University of Santiago de Compostela. Faculty of Economics and Business., vol. 26(2), pages 113-128.
    19. Shaomeng Jia & Claudia R. Williamson, 2019. "Aid, Policies, And Growth: Why So Much Confusion?," Contemporary Economic Policy, Western Economic Association International, vol. 37(4), pages 577-599, October.
    20. Edmore Mahembe & Nicholas Mbaya Odhiambo, 2019. "Foreign aid, poverty and economic growth in developing countries: A dynamic panel data causality analysis," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1626321-162, January.
    21. repec:ers:journl:v:xxiv:y:2021:i:special4:p:583-600 is not listed on IDEAS
    22. Sèna Kimm Gnangnon, 2023. "Trade costs and tax transition reform in developing countries," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(4), pages 941-977, October.

    More about this item

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    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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