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Thresholds in Aid Effectiveness

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  • Laurent Wagner

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)

Abstract

Is the big push hypothesis consistent with capacity constraints in the study of aid effectiveness? Big push hypothesis suggests the existence of a minimum threshold below which aid is not effective, while the constraints referred to by the concept of absorptive capacity suggests the existence of another threshold above which aid is no longer effective. This paper addresses the issue of multiple thresholds characterizing the aid/growth relationship. Using a semiparametric econometric method we do find that aid become effective only above a critical level but also become detrimental to growth for higher value of aid flows. We also investigate how the quality of economic policies and vulnerability modifies the level of those two thresholds. We finally propose a dynamic explanation of the aid/growth relationship.

Suggested Citation

  • Laurent Wagner, 2011. "Thresholds in Aid Effectiveness," Working Papers halshs-00556696, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00556696
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00556696
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    Cited by:

    1. is not listed on IDEAS
    2. Guillaumont, Patrick & Guillaumont Jeanneney, Sylviane & Wagner, Laurent, 2017. "How to Take into Account Vulnerability in Aid Allocation Criteria and Lack of Human Capital as Well: Improving the Performance Based Allocation," World Development, Elsevier, vol. 90(C), pages 27-40.
    3. Patrick Guillaumont & Laurent Wagner, 2014. "Aid Effectiveness for Poverty Reduction: Lessons from Cross‑country Analyses, with a Special Focus on Vulnerable Countries," Revue d’économie du développement, De Boeck Université, vol. 22(HS01), pages 217-261.
    4. Michaël GOUJON & Sosso FEINDOUNO, 2016. "Human Assets Index retrospective series: 2016 update," Working Papers P179, FERDI.
    5. Patrick Guillaumont, 2011. "Aid effectiveness for poverty reduction:macroeconomic overview and emerging issues," CERDI Working papers halshs-00554285, HAL.
    6. Michaël GOUJON & Mathilde CLOSSET & Sosso FEINDOUNO, 2014. "Human Assets Index Retrospective series: 2013 update," Working Papers P110, FERDI.
    7. Patrick GUILLAUMONT, 2009. "Aid effectiveness for poverty reduction: macroeconomic overview and emerging issues," Working Papers P05, FERDI.
    8. Bah, El-hadj M. & Ward, Jeremy, 2011. "Effectiveness of foreign aid in Small Island Developing States," MPRA Paper 32062, University Library of Munich, Germany.
    9. Patrick Guillaumont & Laurent Wagner, 2012. "Aid and Growth Accelerations: Vulnerability Matters," Post-Print halshs-00692388, HAL.
    10. repec:unu:wpaper:wp2012-31 is not listed on IDEAS
    11. Ronald Kumar, 2014. "Exploring the nexus between capital inflows and growth in Latin America and the Caribbean: a study of clusters led by Brazil and Mexico," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(5), pages 2537-2552, September.

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