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A Primer on Foreign Aid

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  • Steve Radelet

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Abstract

Controversies about aid effectiveness go back decades. Some experts charge that aid has enlarged government bureaucracies, perpetuated bad governments, enriched the elite in poor countries, or just been wasted. Others argue that although aid has sometimes failed, it has supported poverty reduction and growth in some countries and prevented worse performance in others. This new working paper by CGD senior fellow Steve Radelet explores trends in aid, the motivations for aid, its impacts, and debates about reforming aid. It begins by examining aid magnitudes and who gives and receives aid. It discusses the multiple motivations and objectives of aid, some of which conflict with each other. It then explores the empirical evidence on the relationship between aid and growth, which is divided between research that finds no relationship and research that finds a positive relationship (at least under certain circumstances). It also examines some of the key challenges in making aid more effective, including the principal-agent problem and the related issue of conditionality, and concludes by examining some of the main proposals for improving aid effectiveness.

Suggested Citation

  • Steve Radelet, 2006. "A Primer on Foreign Aid," Working Papers 92, Center for Global Development.
  • Handle: RePEc:cgd:wpaper:92
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    File URL: http://www.cgdev.org/content/publications/detail/8846
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    Citations

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    Cited by:

    1. James B. Ang, 2009. "Financial Liberalization And The Aid Growth Relationship In India," Development Research Unit Working Paper Series 10-09, Monash University, Department of Economics.
    2. Osakwe, Patrick N. & Ben Hammouda, Hakim, 2006. "Financing Development in Africa: Trends, Issues and Challenges," MPRA Paper 1815, University Library of Munich, Germany.
    3. Ann Veiderpass, 2015. "Foreign aid and productivity," Journal of Productivity Analysis, Springer, vol. 43(3), pages 249-258, June.
    4. repec:eee:wdevel:v:106:y:2018:i:c:p:136-148 is not listed on IDEAS
    5. Mina Baliamoune-Lutz & George Mavrotas, 2009. "Aid Effectiveness: Looking at the Aid-Social Capital-Growth Nexus," Review of Development Economics, Wiley Blackwell, vol. 13(s1), pages 510-525, August.
    6. Danny Cassimon & Stijn Claessens & Bjorn Van Campenhout, 2007. "Empirical Evidence on the New International Aid Architecture," IMF Working Papers 07/277, International Monetary Fund.
    7. Attia, Sayed Moawad, 2009. "The Role of USAID in Development in Egypt," MPRA Paper 16578, University Library of Munich, Germany, revised 02 Aug 2009.
    8. Dorothy McCormick, 2008. "China & India as Africa's New Donors: The Impact of Aid on Development," Review of African Political Economy, Taylor & Francis Journals, vol. 35(115), pages 73-92, March.
    9. Tierney, Michael J. & Nielson, Daniel L. & Hawkins, Darren G. & Roberts, J. Timmons & Findley, Michael G. & Powers, Ryan M. & Parks, Bradley & Wilson, Sven E. & Hicks, Robert L., 2011. "More Dollars than Sense: Refining Our Knowledge of Development Finance Using AidData," World Development, Elsevier, vol. 39(11), pages 1891-1906.
    10. Jared A. Pincin, 2013. "Political Power and Aid-Tying Practices in the Development Assistance Committee Countries," Oxford Development Studies, Taylor & Francis Journals, vol. 41(3), pages 372-390, September.
    11. Malokele Nanivazo & Sajal Lahiri, 2015. "Promoting Trade Liberalization: Theoretical Analysis of Foreign Aid as Prize," Review of Development Economics, Wiley Blackwell, vol. 19(3), pages 748-757, August.
    12. Wilson, Sven E., 2011. "Chasing Success: Health Sector Aid and Mortality," World Development, Elsevier, vol. 39(11), pages 2032-2043.
    13. Gopalan, Sasidaran & Rajan, Ramkishen S., 2016. "Has Foreign Aid Been Effective in the Water Supply and Sanitation Sector? Evidence from Panel Data," World Development, Elsevier, vol. 85(C), pages 84-104.
    14. Marchesi, Silvia & Missale, Alessandro, 2013. "Did High Debts Distort Loan and Grant Allocation to IDA Countries?," World Development, Elsevier, vol. 44(C), pages 44-62.
    15. George Mavrotas & Bazoumana Ouattara, 2007. "Aid Modalities and Budgetary Response: Panel Data Evidence," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 143(4), pages 720-741, December.
    16. Katharina Stepping, 2012. "Do poor health conditions lead to higher allocation of development assistance?," MAGKS Papers on Economics 201230, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

    More about this item

    Keywords

    Foreign aid; poverty reduction;

    JEL classification:

    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O00 - Economic Development, Innovation, Technological Change, and Growth - - General - - - General
    • F00 - International Economics - - General - - - General

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