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Donor policy rules and aid effectiveness

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  • Dalgaard, Carl-Johan

Abstract

The present paper examines the macroeconomic impact of aid, by introducing endogenous aid allocations into a neoclassical growth framework. On this basis it is shown that donor policies can have important implications for the trajectory of recipients' GDP per capita. Depending on specific donor policy choices, aid disbursements may lead to faster transitional growth, stagnation or cyclical growth. Moreover, the analysis also suggests that donor policies may be part of the reason why foreign aid is not found to be uniformly effective in raising long-run productivity across recipients.

Suggested Citation

  • Dalgaard, Carl-Johan, 2008. "Donor policy rules and aid effectiveness," Journal of Economic Dynamics and Control, Elsevier, vol. 32(6), pages 1895-1920, June.
    • Handle: RePEc:eee:dyncon:v:32:y:2008:i:6:p:1895-1920
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    3. Kitaura, Koji & Ogawa, Hikaru & Yakita, Sayaka, 2011. "Multiple equilibria arising from donor’s aid policy in economic development," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 819-827.
    4. 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.
    5. Stephen M. Miller & Kyriakos C. Neanidis, 2012. "Demographic Transition and Economic Welfare: The Role of Humanitarian Aid," Working papers 2012-06, University of Connecticut, Department of Economics.
    6. Stephen J. Turnovsky & Serpil Tekin & Ms. Valerie Cerra, 2008. "Foreign Aid and Real Exchange Rate Adjustments in a Financially Constrained Dependent Economy," IMF Working Papers 2008/204, International Monetary Fund.
    7. Cuong Le Van & Ngoc-Sang Pham & Thi Kim Cuong Pham, 2021. "Development loans, poverty trap, and economic dynamics," Working Papers halshs-03456281, HAL.
    8. 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.
    9. Thi Kim Cuong PHAM & Ngoc-Sang PHAM, 2017. "Economic growth and escaping the poverty trap: how does development aid work?," Working Papers P197, FERDI.
    10. Kumar, Ronald Ravinesh, 2013. "Remittances and economic growth: A study of Guyana," Economic Systems, Elsevier, vol. 37(3), pages 462-472.
    11. Chatterjee Santanu & Giuliano Paola & Kaya Ilker, 2012. "Where Has All the Money Gone? Foreign Aid and the Composition of Government Spending," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(1), pages 1-36, August.
    12. Ronald Kumar, 2014. "Exploring the nexus between capital inflows and growth in Latin America and the Caribbean: a study of clusters led by Brazil and Mexico," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(5), pages 2537-2552, September.
    13. Ozan Hatipoglu & Alp Eren Akyuz, 2018. "Donor-oriented foreign aid, trade and growth," Working Papers 2018/01, Bogazici University, Department of Economics.
    14. Temple, Jonathan R.W., 2010. "Aid and Conditionality," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4415-4523, Elsevier.
    15. Atsuko Tanaka, "undated". "Notes on Foreign Aid Selectivity Based on Human Capital," Working Papers 2015-23, Department of Economics, University of Calgary, revised 27 Sep 2015.
    16. Herzer, Dierk & Nunnenkamp, Peter, 2012. "The effect of foreign aid on income inequality: Evidence from panel cointegration," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 245-255.
    17. Mikitchuk, Marina, 2024. "Forming the benefit-oriented official assistance: Cross-country analysis," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 74, pages 124-143.
    18. Hamzeh Arabzadeh, 2016. "Foreign Aid, Public Investment and Capital Market Liberalization," LIDAM Discussion Papers IRES 2016018, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

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