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Impact of health aid in developing countries: The public vs. the private channels

  • Afridi, Muhammad Asim
  • Ventelou, Bruno

This paper examines the efficient allocation of international health aid. We built a simple macroeconomic model which considers an endogenous allocation of aid mixed between the public and the private channels. We derive a non-cooperative interaction-game involving the private sector, the donor and the recipient government. We compare the equilibrium of the game to the optimal level of health aid allocation, showing a gap between both. The empirical analysis is based on the Institute for Health Metrics and Evaluation (IHME) and World Health Organization (WHO) data sets using dynamic panel data model with fixed effects (system-GMM). Our results show that health aid actually reduces adult mortality in developing countries. Furthermore, we show that the actual allocation of aid-mix between government and private channels is not health efficient and there is room for reallocation.

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 31 (2013)
Issue (Month): C ()
Pages: 759-765

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Handle: RePEc:eee:ecmode:v:31:y:2013:i:c:p:759-765
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  17. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
  18. Mishra, Prachi & Newhouse, David, 2009. "Does health aid matter?," Journal of Health Economics, Elsevier, vol. 28(4), pages 855-872, July.
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