IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-01907483.html
   My bibliography  Save this paper

Equal opportunity and poverty reduction : how aid should be allocated?

Author

Listed:
  • Patrick Guillaumont

    (FERDI - Fondation pour les Etudes et Recherches sur le Développement International)

  • Phu Nguyen-Van

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

  • Thi Kim Cuong Pham

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

  • Laurent Wagner

    (FERDI - Fondation pour les Etudes et Recherches sur le Développement International)

Abstract

This paper proposes a model of aid allocation which aims to equalize the opportunity between recipient countries to reduce the poverty. The model takes into account the natural growth deviation which is defined by the gap between the growth rate required to reach a development goal and the growth rate observed in the recipient countries. The resulting optimal aid allocation is computed using the estimation of a growth equation. Said equation includes effects of aid and structural handicaps to growth in recipient countries (which are represented by the economic vulnerability index and lack of human capital). To illustrate the interest of our approach, we perform a simulation which shows a substantial difference between the aid allocation obtained with our multi-criteria principle and the observed allocation. Moreover, we also shed light on the impact of the donors' sensitivity with respect to the natural growth deviation on the optimal aid allocation.

Suggested Citation

  • Patrick Guillaumont & Phu Nguyen-Van & Thi Kim Cuong Pham & Laurent Wagner, 2018. "Equal opportunity and poverty reduction : how aid should be allocated?," Working Papers hal-01907483, HAL.
    • Handle: RePEc:hal:wpaper:hal-01907483
    Note: View the original document on HAL open archive server: https://hal.science/hal-01907483
    as

    Download full text from publisher

    File URL: https://hal.science/hal-01907483/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Patrick Guillaumont & Mark Mcgillivray & Thi Kim Cuong Pham, 2017. "Reforming Performance-Based Aid Allocation Practice," Post-Print hal-02166678, HAL.
    2. 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.
    3. Carter, Patrick & Postel-Vinay, Fabien & Temple, Jonathan, 2015. "Dynamic aid allocation," Journal of International Economics, Elsevier, vol. 95(2), pages 291-304.
    4. P. Guillaumont & L. Chauvet, 2001. "Aid and Performance: A Reassessment," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 66-92.
    5. Cogneau, Denis & Naudet, Jean-David, 2007. "Who Deserves Aid? Equality of Opportunity, International Aid, and Poverty Reduction," World Development, Elsevier, vol. 35(1), pages 104-120, January.
    6. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    7. Lisa Chauvet & Patrick Guillaumont, 2009. "Aid, Volatility, and Growth Again: When Aid Volatility Matters and When it Does Not," Review of Development Economics, Wiley Blackwell, vol. 13(3), pages 452-463, August.
    8. Joël CARIOLLE, 2011. "The Economic Vulnerability Index - 2010 Update," Working Papers I09, FERDI.
    9. Carter, Patrick, 2014. "Aid allocation rules," European Economic Review, Elsevier, vol. 71(C), pages 132-151.
    10. repec:dau:papers:123456789/5400 is not listed on IDEAS
    11. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    12. William Easterly, 2007. "Are aid agencies improving? [‘Who gives foreign aid to whom and why?’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 22(52), pages 634-678.
    13. Collier, Paul & Dollar, David, 2001. "Can the World Cut Poverty in Half? How Policy Reform and Effective Aid Can Meet International Development Goals," World Development, Elsevier, vol. 29(11), pages 1787-1802, November.
    14. Knack, Stephen & Rogers, F. Halsey & Eubank, Nicholas, 2011. "Aid Quality and Donor Rankings," World Development, Elsevier, vol. 39(11), pages 1907-1917.
    15. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September.
    16. McGillivray, Mark & Pham, Thi Kim Cuong, 2017. "Reforming Performance-Based Aid Allocation Practice," World Development, Elsevier, vol. 90(C), pages 1-5.
    17. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. "Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-389, September.
    18. repec:bla:rdevec:v:13:y:2009:i:s1:p:452-463 is not listed on IDEAS
    19. Michaël GOUJON & Mathilde CLOSSET & Sosso FEINDOUNO, 2014. "Human Assets Index Retrospective series: 2013 update," Working Papers P110, FERDI.
    20. Llavador, Humberto G. & Roemer, John E., 2001. "An equal-opportunity approach to the allocation of international aid," Journal of Development Economics, Elsevier, vol. 64(1), pages 147-171, February.
    21. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    22. Philippe Aghion & Steven Durlauf (ed.), 2005. "Handbook of Economic Growth," Handbook of Economic Growth, Elsevier, edition 1, volume 1, number 1.
    23. Platteau, Jean-Philippe & Bourguignon, François, 2017. "Aid Effectiveness: Revisiting the Trade-off Between Needs and Governance," CEPR Discussion Papers 12277, C.E.P.R. Discussion Papers.
    24. repec:dau:papers:123456789/4461 is not listed on IDEAS
    25. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Patrick GUILLAUMONT & Phu NGUYEN-VAN & Thi Kim Cuong PHAM & Laurent WAGNER, 2018. "Equal opportunity and poverty reduction: how aid should be allocated?," Working Papers P239, FERDI.
    2. Patrick Guillaumont & Phu Nguyen‐Van & Thi Kim Cuong Pham & Laurent Wagner, 2023. "Equal opportunity and poverty reduction: How should aid be allocated?," Review of Development Economics, Wiley Blackwell, vol. 27(1), pages 550-607, February.
    3. Patrick Guillaumont & Phu Nguyen-Van & Thi Kim Cuong Pham & Laurent Wagner, 2015. "Efficient and fair allocation of aid," Working Papers of BETA 2015-10, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    4. Dicharry, Benoit & Nguyen-Van, Phu & Pham, Thi Kim Cuong, 2019. "“The winner takes it all” or a story of the optimal allocation of the European Cohesion Fund," European Journal of Political Economy, Elsevier, vol. 59(C), pages 385-399.
    5. Pham, Ngoc-Sang & Pham, Thi Kim Cuong, 2020. "Effects of foreign aid on the recipient country’s economic growth," Journal of Mathematical Economics, Elsevier, vol. 86(C), pages 52-68.
    6. Thi Kim Cuong PHAM & Ngoc-Sang PHAM, 2017. "Economic growth and escaping the poverty trap: how does development aid work?," Working Papers P197, FERDI.
    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. Minoiu, Camelia & Reddy, Sanjay G., 2010. "Development aid and economic growth: A positive long-run relation," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(1), pages 27-39, February.
    10. Yousuf, Ahmed Sadek, 2012. "Assessing Impact of Health Oriented Aid on Infant Mortality Rates," EconStor Preprints 67391, ZBW - Leibniz Information Centre for Economics.
    11. 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.
    12. 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 191-216, June.
    13. Ieva Skarda, 2016. "The Political Economy of Foreign Aid Effectiveness," Discussion Papers 16/12, Department of Economics, University of York.
    14. Johnson P. Asiama & Peter Quartey, 2009. "Foreign Aid and the Human Development Indicators in Sub-Saharan Africa," Journal of Developing Societies, , vol. 25(1), pages 57-83, January.
    15. Yousuf, Ahmed Sadek, 2012. "Impact of Health Aid on Infant Mortality Rate," MPRA Paper 42945, University Library of Munich, Germany, revised 12 Oct 2012.
    16. Juergen Bitzer & Erkan Goeren, 2018. "Foreign Aid and Subnational Development: A Grid Cell Analysis," Working Papers V-407-18, University of Oldenburg, Department of Economics, revised Mar 2018.
    17. León-González, Roberto & Montolio, Daniel, 2015. "Endogeneity and panel data in growth regressions: A Bayesian model averaging approach," Journal of Macroeconomics, Elsevier, vol. 46(C), pages 23-39.
    18. repec:spo:wpmain:info:hdl:2441/5su81hd0ma8soqp1nvf7852ffv is not listed on IDEAS
    19. Julia Cage, 2015. "Measuring Policy Performance: Can We Do Better than the World Bank?," Post-Print hal-03392964, HAL.
    20. Julia Cage, 2015. "Measuring Policy Performance: Can We Do Better than the World Bank?," SciencePo Working papers Main hal-03392964, HAL.
    21. 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.

    More about this item

    Keywords

    Efficiency; Equity; Development aid; Growth deviation; Vulnerability;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-01907483. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.