IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Aid Allocation Rules

  • Patrick Carter

    ()

This paper studies the aid allocation rule used by major development agencies, and investigates optimal allocations when recipients are neoclassical economies undergoing transition dynamics. When recipients face aid absorption constraints, allocations that favor poorer recipients are not always optimal, contrary to what is assumed in assessments of donor performance. The most quantitatively significant determinants of the optimal sensitivity to recipient characteristics are the generosity of the aid budget and the extent of absorption constraints. In neoclassical recipients aid can only accelerate growth where there is already growth, so the optimal rule places little weight on growth and optimality is largely a matter of balancing recipient need against absorption constraints.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.efm.bris.ac.uk/economics/working_papers/pdffiles/dp12630.pdf
Download Restriction: no

Paper provided by Department of Economics, University of Bristol, UK in its series Bristol Economics Discussion Papers with number 12/630.

as
in new window

Length: 36 pages
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:bri:uobdis:12/630
Contact details of provider: Postal: 8 Woodland Road, Bristol, BS8 1TN
Phone: 0117 928 8415
Fax: 0117 928 8577
Web page: http://www.efm.bris.ac.uk/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Zac Mills & Annette Kyobe & Jim Brumby & Chris Papageorgiou & Era Dabla-Norris, 2011. "Investing in Public Investment; An Index of Public Investment Efficiency," IMF Working Papers 11/37, International Monetary Fund.
  2. Wood, Adrian, 2008. "Looking Ahead Optimally in Allocating Aid," World Development, Elsevier, vol. 36(7), pages 1135-1151, July.
  3. Alesina, Alberto & Dollar, David, 2000. " Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March.
  4. Michael Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting Chickens When They Hatch: The Short-term Effect of Aid on Growth," Working Papers 44, Center for Global Development.
  5. Francesco Caselli & James Feyrer, 2005. "The Marginal Product of Capital," NBER Working Papers 11551, National Bureau of Economic Research, Inc.
  6. Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2004. "On The Empirics of Foreign Aid and Growth," Economic Journal, Royal Economic Society, vol. 114(496), pages F191-F216, 06.
  7. Gil S. Epstein & Ira N. Gang, 2006. "Good Governance and Good Aid Allocation," Departmental Working Papers 200627, Rutgers University, Department of Economics.
  8. Ramesh Durbarry, 2004. "Foreign aid: is it all consumed?," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(2), pages 189-199.
  9. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September.
  10. Stampini, Marco & Tornarolli, Leopoldo, 2012. "The Growth of Conditional Cash Transfers in Latin America and the Caribbean: Did They Go Too Far?," IZA Policy Papers 49, Institute for the Study of Labor (IZA).
  11. Benjamin A. Olken & Rohini Pande, 2011. "Corruption in Developing Countries," NBER Working Papers 17398, National Bureau of Economic Research, Inc.
  12. Paul Collier & David Dollar, 2004. "Development effectiveness: what have we learnt?," Economic Journal, Royal Economic Society, vol. 114(496), pages F244-F271, 06.
  13. William Easterly & Tobias Pfutze, 2008. "Where Does the Money Go? Best and Worst Practices in Foreign Aid," Journal of Economic Perspectives, American Economic Association, vol. 22(2), pages 29-52, Spring.
  14. Eric Werker & Faisal Z. Ahmed & Charles Cohen, 2009. "How Is Foreign Aid Spent? Evidence from a Natural Experiment," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 225-44, July.
  15. Karl-Josef Koch & Timo Trimborn & Thomas M. Steger, 2005. "Multi-Dimensional Transitional Dynamics: A Simple Numerical Procedure," Volkswirtschaftliche Diskussionsbeiträge 121-05, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
  16. Roland Hodler, 2011. "Development (Paradigm) Failures," Working Papers 11.01, Swiss National Bank, Study Center Gerzensee.
  17. repec:idb:brikps:publication-detail,7101.html?id=66306 is not listed on IDEAS
  18. Agénor, Pierre-Richard & Bayraktar, Nihal & El Aynaoui, Karim, 2008. "Roads out of poverty? Assessing the links between aid, public investment, growth, and poverty reduction," Journal of Development Economics, Elsevier, vol. 86(2), pages 277-295, June.
  19. Kraay, Aart & Raddatz, Claudio, 2007. "Poverty traps, aid, and growth," Journal of Development Economics, Elsevier, vol. 82(2), pages 315-347, March.
  20. Gertler, Paul & Martinez, Sebastian & Rubio-Codina, Marta, 2006. "Investing cash transfers to raise long term living standards," Policy Research Working Paper Series 3994, The World Bank.
  21. repec:cup:cbooks:9780521187527 is not listed on IDEAS
  22. Carter, Paddy & Postel-Vinay, Fabien & Temple, Jonathan, 2013. "Dynamic Aid Allocation," CEPR Discussion Papers 9596, C.E.P.R. Discussion Papers.
  23. Patrick Carter & Jonathan Temple, 2014. "Virtuous Circles and the Case for Aid," Bristol Economics Discussion Papers 14/636, Department of Economics, University of Bristol, UK.
  24. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
  25. Almuth Scholl, 2005. "Aid Effectiveness and Limited Enforceable Conditionality," SFB 649 Discussion Papers SFB649DP2005-054, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany, revised Aug 2005.
  26. Dudley, Leonard & Montmarquette, Claude, 1976. "A Model of the Supply of Bilateral Foreign Aid," American Economic Review, American Economic Association, vol. 66(1), pages 132-42, March.
  27. Michael A. Clemens & Steven Radelet & Rikhil R. Bhavnani & Samuel Bazzi, 2012. "Counting Chickens when they Hatch: Timing and the Effects of Aid on Growth," Economic Journal, Royal Economic Society, vol. 122(561), pages 590-617, 06.
  28. Rick van der Ploeg & Anthony J Venables, 2010. "Absorbing A Windfall Of Foreign Exchange: Dutch disease dynamics," OxCarre Working Papers 052, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  29. Sanjeev Gupta & Alvar Kangur & Abdoul Aziz Wane & Chris Papageorgiou, 2011. "Efficiency-Adjusted Public Capital and Growth," IMF Working Papers 11/217, International Monetary Fund.
  30. Dalgaard, Carl-Johan, 2008. "Donor policy rules and aid effectiveness," Journal of Economic Dynamics and Control, Elsevier, vol. 32(6), pages 1895-1920, June.
  31. Stéphane Pallage & Michel A. Robe & Catherine Bérubé, 2006. "The Potential of Foreign Aid as Insurance," IMF Staff Papers, Palgrave Macmillan, vol. 53(3), pages 5.
  32. Ryan N. Banerjee, 2010. "Which countries receive aid as insurance and why? A theory of optimal aid policy," 2010 Meeting Papers 667, Society for Economic Dynamics.
  33. Anke Hoeffler & Verity Outram, 2011. "Need, Merit, or Self‐Interest—What Determines the Allocation of Aid?," Review of Development Economics, Wiley Blackwell, vol. 15(2), pages 237-250, 05.
  34. Knack, Stephen & Rogers, F. Halsey & Eubank, Nicholas, 2010. "Aid quality and donor rankings," Policy Research Working Paper Series 5290, The World Bank.
  35. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
  36. Ben R. Craig & William E. Jackson, III & James B. Thomson, 2004. "On SBA-guaranteed lending and economic growth," Working Paper 0403, Federal Reserve Bank of Cleveland.
  37. repec:idb:brikps:78783 is not listed on IDEAS
  38. Niehaus, Paul & Sukhtankar, Sandip, 2013. "The marginal rate of corruption in public programs: Evidence from India," Journal of Public Economics, Elsevier, vol. 104(C), pages 52-64.
  39. Chatterjee, Santanu & Giuliano, Paola & Kaya, Ilker, 2007. "Where Has All the Money Gone? Foreign Aid and the Quest for Growth," IZA Discussion Papers 2858, Institute for the Study of Labor (IZA).
  40. Ben S. Bernanke & Kenneth Rogoff, 2001. "NBER Macroeconomics Annual 2000, Volume 15," NBER Books, National Bureau of Economic Research, Inc, number bern01-1.
  41. Bourguignon, Fran.ois & Sundberg, Mark, 2006. "Absorptive Capacity and Achieving the MDGs," Working Paper Series RP2006/47, World Institute for Development Economic Research (UNU-WIDER).
  42. Dollar, David & Levin, Victoria, 2006. "The Increasing Selectivity of Foreign Aid, 1984-2003," World Development, Elsevier, vol. 34(12), pages 2034-2046, December.
  43. William Easterly, 2007. "Are aid agencies improving?," Economic Policy, CEPR;CES;MSH, vol. 22, pages 633-678, October.
  44. Robert E. Hall, 2009. "Reconciling Cyclical Movements in the Marginal Value of Time and the Marginal Product of Labor," Journal of Political Economy, University of Chicago Press, vol. 117(2), pages 281-323, 04.
  45. Charles I. Jones, 2011. "Life and Growth," NBER Working Papers 17094, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bri:uobdis:12/630. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jonathan Temple)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.