Big Push versus Absorptive Capacity: How to Reconcile the Two Approaches
We examine whether absorptive capacity represents a compulsory reason to reject the proposal of a large aid increase to support a big push. We argue that poverty trap is a probability for many countries, in particular the Least Developed Countries and that an aid increase is relevant for them. Moreover we show that the decrease in marginal aid returns is slower in vulnerable countries, what enhances the rationale to take vulnerability as one of the aid allocation criteria. We then examine the main limits to absorptive capacity, such as disbursement constraints and short term bottlenecks, macro economic troubles, including loss of competitiveness and macroeconomic volatility, as well as institution weakening. The general conclusion we draw to reconcile the two approaches is that absorptive capacity strongly depends on aid itself or on its very modalities. Big push and absorptive capacity approaches cannot be reconciled without an aid reform coming with an aid increase. First, needed is to balance the utilisation of aid between directly productive and social activities, in order to avoid transitory loss of competitiveness. Second, schemes helping to use aid as insurance against exogeneous shocks are to be enhanced because they lower the risk of Dutch disease and contribute to a faster and more equitable long term growth. Finally a performance-based conditionality should be substituted to the traditional policy-based one in order to cope with several absorptive capacity limitations, most importantly the socio-political one. An aid supported big push will not be effective without a new ownership of policy by the recipient countries.
|Date of creation:||09 Feb 2011|
|Date of revision:|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00564565|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
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.:
- Dollar, David & Levin, Victoria, 2005. "Sowing and reaping: institutional quality and project outcomes in developing countries," Policy Research Working Paper Series 3524, The World Bank.
- Patrick Guillaumont & Sylviane Guillaumont Jeanneney & Jacky Amprou, 2011.
"Aid Selectivity According to Augmented Criteria,"
- Sylviane GUILLAUMONT JEANNENEY & Patrick GUILLAUMONT & Jacky AMPROU, 2005. "Aid Selectivity According to Augmented Criteria," Working Papers 200526, CERDI.
- Sylviane GUILLAUMONT JEANNENEY & Patrick GUILLAUMONT & Jacky AMPROU, 2006. "Aid Selectivity According to Augmented Criteria," Working Papers 200616, CERDI.
- George Mavrotas, 2005. "Aid heterogeneity: looking at aid effectiveness from a different angle," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(8), pages 1019-1036.
- Patrick GUILLAUMONT & Sylviane GUILLAUMONT JEANNENEY & Lisa CHAUVET & Pierre JACQUET & Bertrand SAVOYE, 2003.
"Attenuating through Aid the Vulnerability to Price Shocks,"
- Patrick Guillaumont & Sylviane Guillaumont Jeanneney & Pierre Jacquet & Lisa Chauvet & Bertrand Savoye, 2007. "Attenuating through Aid the Vulnerability to Price Shocks," Post-Print hal-00293071, HAL.
- Hansen, Henrik & Tarp, Finn, 1999.
"Aid Effectiveness Disputed,"
62290, University Library of Munich, Germany.
- Raghuram G. Rajan & Arvind Subramanian, 2005. "What Undermines Aid's Impact on Growth?," NBER Working Papers 11657, National Bureau of Economic Research, Inc.
- Patrick GUILLAUMONT & Lisa CHAUVET, 1999.
"Aid and Performance: A Reassessment,"
- Arellano, Cristina & Bulír, Ales & Lane, Timothy & Lipschitz, Leslie, 2009.
"The dynamic implications of foreign aid and its variability,"
Journal of Development Economics,
Elsevier, vol. 88(1), pages 87-102, January.
- Timothy D. Lane & Leslie Lipschitz & Cristina Arellano & Ales Bulir, 2005. "The Dynamic Implications of Foreign Aid and Its Variability," IMF Working Papers 05/119, International Monetary Fund.
- Raghuram G. Rajan & Arvind Subramanian, 2014.
"What Undermines Aidâ€™s Impact on Growth?,"
- Adam, Christopher & Chambas, Gerard & Guillaumont, Patrick & Guillaumont Jeanneney, Sylviane & Gunning, Jan Willem, 2004.
"Performance-Based Conditionality: A European Perspective,"
Elsevier, vol. 32(6), pages 1059-1070, June.
- Sylviane GUILLAUMONT JEANNENEY & Patrick GUILLAUMONT & Gérard CHAMBAS & Christopher ADAM & Jan Willem GUNNING, 2003. "Performance-Based Conditionality: A European Perspective," Working Papers 200306, CERDI.
- Kasekende, L A & Atingi-Ego, M, 1999. "Uganda's Experience with Aid," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 8(4), pages 617-49, December.
- Elliot Berg, 2003. "Augmenter l'efficacité de l'aide : une critique de quelques points de vue actuels," Revue d’économie du développement, De Boeck Université, vol. 11(4), pages 11-42.
- Hansen, Henrik & Tarp, Finn, 2001.
"Aid and growth regressions,"
Journal of Development Economics,
Elsevier, vol. 64(2), pages 547-570, April.
- Griffin, Keith, 1970. "Foreign Capital, Domestic Savings and Economic Development," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 32(2), pages 99-112, May.
- Agenor, Pierre-Richard & Bayraktar, Nihal & Pinto Moreira, Emmanuel & El Aynaoui, Karim, 2005.
"Achieving the Millennium Development Goals in Sub-Saharan Africa : a macroeconomic monitoring framework,"
Policy Research Working Paper Series
3750, The World Bank.
- Pierre-Richard Agénor & Nihal Bayraktar & Emmanuel Pinto Moreira & Karim El Aynaoui, 2006. "Achieving the Millennium Development Goals in Sub-Saharan Africa: A Macroeconomic Monitoring Framework," The World Economy, Wiley Blackwell, vol. 29(11), pages 1519-1547, November.
- Raghuram G. Rajan, 2005.
"Aid and Growth: What Does The Cross-Country Evidence Really Show?,"
- Raghuram G. Rajan & Arvind Subramanian, 2008. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 643-665, November.
- Raghuram G. Rajan & Arvind Subramanian, 2005. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," NBER Working Papers 11513, National Bureau of Economic Research, Inc.
- Raghuram Rajan & Arvind Subramanian, 2005. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," IMF Working Papers 05/127, International Monetary Fund.
- Peter S. Heller, 2005. "Pity the Finance Minister: Issues in Managing a Substantial Scaling-Up of Aid Flows," IMF Working Papers 05/180, International Monetary Fund.
- R. Lensink & H. White, 2001. "Are There Negative Returns to Aid?," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 42-65.
- Papanek, Gustav F, 1973. "Aid, Foreign Private Investment, Savings, and Growth in Less Developed Countries," Journal of Political Economy, University of Chicago Press, vol. 81(1), pages 120-30, Jan.-Feb..
- Robert Lensink & Oliver Morrissey, 2000. "Aid instability as a measure of uncertainty and the positive impact of aid on growth," Journal of Development Studies, Taylor & Francis Journals, vol. 36(3), pages 31-49.
- Ale Bulir & A. Javier Hamann, 2003. "Aid Volatility: An Empirical Assessment," IMF Staff Papers, Palgrave Macmillan, vol. 50(1), pages 4.
- Kaufmann, Daniel & Wang, Yan, 1995. "Macroeconomic policies and project performance in the social sectors: A model of human capital production and evidence from LDCs," World Development, Elsevier, vol. 23(5), pages 751-765, May.
- Shantayanan Devarajan & David R. Dollar & Torgny Holmgren, 2001. "Aid and Reform in Africa : Lessons from Ten Case Studies," World Bank Publications, The World Bank, number 13894.
- repec:oup:qjecon:v:114:y:1999:i:1:p:149-184 is not listed on IDEAS
- 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.
When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:halshs-00564565. 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: (CCSD)
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.