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The Curse of the Elders? Aid Effectiveness and Gerontocracy in Developing Countries

Author Info

Listed author(s):
  • Marc Raffinot

    ()

    (LEDa, UMR DIAL-Paris-Dauphine)

  • Baptiste Venet

    ()

    (LEDa, UMR DIAL-Paris-Dauphine)

Abstract

(english) In this paper we use a simple standard overlapping-generation model to assess the impact of foreign aid. Because of deference to the elders, donors are not able to modify the sharing out of aid between the old and the young in the recipient economy. The model shows that, if aid is considered as a device intended to help attain the spontaneous steady state of the economy, it may lead to a rise or fall in savings, and hence in the growth rate of the economy, depending on a threshold share of aid accruing to elders. Alternately, if aid is intended to help the economy to reach its golden-rule steady state, the relevant level of aid increases with the share of aid accruing to elders, up to a certain threshold. If this share is higher than the threshold, the optimal level of aid is negative. _________________________________ (français) Nous utilisons un modèle à générations imbriquées pour montre que la répartition de l’aide entre jeunes et vieux peut avoir un impact sur l’efficacité de l’aide en termes d’épargne, de croissance et de bien-être. Les sociétés en développement sont généralement marquées par une « déférence pour les anciens » profondément ancrée dans la culture traditionnelle. Nous supposons que les donateurs sont incapables de manipuler cette part, et nous montrons que la part de l’aide qui revient aux vieux a un impact sur la croissance et le bien-être positif en dessous d’un certain seuil et négatif au-delà.

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File URL: http://www.dial.ird.fr/media/ird-sites-d-unites-de-recherche/dial/documents/publications/doc_travail/2011/2011-03
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Paper provided by DIAL (Développement, Institutions et Mondialisation) in its series Working Papers with number DT/2011/03.

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Length: 18 pages
Date of creation: Jan 2011
Handle: RePEc:dia:wpaper:dt201103
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Keywords: Developing Countries; Elders; Aid effectiveness; Overlapping Generations Models.;

Find related papers by JEL classification:

  • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
  • F35 - International Economics - - International Finance - - - Foreign Aid
  • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
  • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
  • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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  1. François Bourguignon & Mark Sundberg, 2007. "Aid Effectiveness – Opening the Black Box," American Economic Review, American Economic Association, vol. 97(2), pages 316-321, May.
  2. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
  3. Azam, Jean-Paul & Laffont, Jean-Jacques, 2003. "Contracting for aid," Journal of Development Economics, Elsevier, vol. 70(1), pages 25-58, February.
  4. Henrik Hansen & Finn Tarp, 2000. "Aid effectiveness disputed," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 375-398.
  5. Martin, Philippe & Rogers, Carol Ann, 1997. "Stabilization Policy, Learning-by-Doing, and Economic Growth," Oxford Economic Papers, Oxford University Press, vol. 49(2), pages 152-166, April.
  6. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  7. Holden, Stein T. & Shiferaw, Bekele & Wik, Mette, 1998. "Poverty, market imperfections and time preferences: of relevance for environmental policy?," Environment and Development Economics, Cambridge University Press, vol. 3(01), pages 105-130, February.
  8. Todd Moss & Gunilla Pettersson & Nicolas van de Walle, 2006. "An Aid-Institutions Paradox? A Review Essay on Aid Dependency and State Building in Sub-Saharan Africa," Working Papers 74, Center for Global Development.
  9. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September.
  10. R. Lensink & H. White, 2001. "Are There Negative Returns to Aid?," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 42-65.
  11. Moseley, William G., 2001. "African evidence on the relation of poverty, time preference and the environment," Ecological Economics, Elsevier, vol. 38(3), pages 317-326, September.
  12. Abigail Barr, 1995. "The missing factor: entrepreneurial networks, enterprises and economic growth in Ghana," CSAE Working Paper Series 1995-11, Centre for the Study of African Economies, University of Oxford.
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