Reasonable Expectations and the First Millennium Development Goal: How Much Can Aid Achieve?
While a political consensus has emerged to increase aid flows to Sub-Saharan Africa, empirical studies of the effectiveness of aid in stimulating growth and reducing poverty have yet to yield conclusive results. The present paper takes a different approach. Using the standard neoclassical growth model, we ask how much should be expected from aid a priori. Using a range of different parameter values and model specifications, we address three questions. (i) How much growth should aid flows have produced in Sub-Saharan Africa over the last 3 decades? (ii) How much aid would be needed to attain the First Millennium Development Goal (MDG#1) of cutting poverty in half by 2015? (iii) Taking proposed aid flows as given, how much would structural characteristics, such as domestic savings rates and productivity, have to change in order to reach the MDG#1? Our analysis indicates that, even under optimistic assumptions for the effectiveness of aid, past and future expectations for aid in fostering growth and poverty reduction have been too high.
|Date of creation:||Sep 2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (+45) 35 32 30 10
Fax: +45 35 32 30 00
Web page: http://www.econ.ku.dk
More information through EDIRC
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.:
- Dani Rodrik, 2000. "Saving Transitions," World Bank Economic Review, World Bank Group, vol. 14(3), pages 481-507, September.
- Manuel Arellano, 2003. "Modelling Optimal Instrumental Variables For Dynamic Panel Data Models," Working Papers wp2003_0310, CEMFI.
- Anke E. Hoeffler, 2000.
"The Augmented Solow Model and the African Growth Debate,"
CID Working Papers
36, Center for International Development at Harvard University.
- Hoeffler, Anke E, 2002. " The Augmented Solow Model and the African Growth Debate," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(2), pages 135-58, May.
- 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 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 Rajan & Arvind Subramanian, 2005. "Aid and Growth; What Does the Cross-Country Evidence Really Show?," IMF Working Papers 05/127, International Monetary Fund.
- Raghuram G. Rajan, 2005. "Aid and Growth: What Does The Cross-Country Evidence Really Show?," Working Papers id:54, eSocialSciences.
- Alwyn Young, 2005. "The Gift of the Dying: The Tragedy of Aids and the Welfare of Future African Generations," The Quarterly Journal of Economics, MIT Press, vol. 120(2), pages 423-466, May.
- Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2001.
"On the Empirics of Foreign Aid and Growth,"
EPRU Working Paper Series
03-13, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Sep 2003.
- Douglas Gollin, 2001.
"Getting Income Shares Right,"
Department of Economics Working Papers
2001-11, Department of Economics, Williams College.
- Francesco Caselli & James Feyrer, 2006.
"The Marginal Product of Capital,"
CEP Discussion Papers
dp0735, Centre for Economic Performance, LSE.
- Kraay, Aart & Raddatz, Claudio, 2007.
"Poverty traps, aid, and growth,"
Journal of Development Economics,
Elsevier, vol. 82(2), pages 315-347, March.
- Hansen, Henrik & Tarp, Finn, 2000.
"Aid and Growth Regressions,"
62288, University Library of Munich, Germany.
- Ravallion, Martin, 2001.
"Growth, inequality, and poverty : looking beyond averages,"
Policy Research Working Paper Series
2558, The World Bank.
- Ravallion, Martin, 2001. "Growth, Inequality and Poverty: Looking Beyond Averages," World Development, Elsevier, vol. 29(11), pages 1803-1815, November.
- William Easterly, 2005. "Reliving the '50s: The Big Push, Poverty Traps, and Takeoffs in Economic Development," Working Papers 65, Center for Global Development.
- Stiglitz, Joseph E, 1969.
"Distribution of Income and Wealth among Individuals,"
Econometric Society, vol. 37(3), pages 382-97, July.
- Joseph E. Stiglitz, 1967. "Distribution of Income and Wealth Among Individuals," Cowles Foundation Discussion Papers 238, Cowles Foundation for Research in Economics, Yale University.
- Xavier Sala-i-Martin, 2006. "The World Distribution of Income: Falling Poverty and ... Convergence, Period," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 351-397, May.
- Bond, Stephen Roy & Hoeffler, Anke & Temple, Jonathan, 2001.
"GMM Estimation of Empirical Growth Models,"
CEPR Discussion Papers
3048, C.E.P.R. Discussion Papers.
- Easterly, William, 1999. "The ghost of financing gap: testing the growth model used in the international financial institutions," Journal of Development Economics, Elsevier, vol. 60(2), pages 423-438, December.
- Michael Clemens & Steven Radelet & Rikhil Bhavnani, 2004.
"Counting Chickens When They Hatch: The Short-term Effect of Aid on Growth,"
44, Center for Global Development.
- Michael A. Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting chickens when they hatch: The short-term effect of aid on growth," International Finance 0407010, EconWPA.
- Sergio T. Rebelo, 1990.
"Long Run Policy Analysis and Long Run Growth,"
NBER Working Papers
3325, National Bureau of Economic Research, Inc.
- repec:chb:bcchwp:03 is not listed on IDEAS
- Timothy Besley & Robin Burgess, 2003. "Halving Global Poverty," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 3-22, Summer.
- Dollar, David & Kraay, Aart, 2001.
"Growth is good for the poor,"
Policy Research Working Paper Series
2587, The World Bank.
- Mankiw, N Gregory & Romer, David & Weil, David N, 1992.
"A Contribution to the Empirics of Economic Growth,"
The Quarterly Journal of Economics,
MIT Press, vol. 107(2), pages 407-37, May.
- Carl-Johan Dalgaard & Henrik Hansen, 2005. "The Return to Foreign Aid," Discussion Papers 05-04, University of Copenhagen. Department of Economics.
- J. K. Boyce & L. Ndikumana, 2001. "Is Africa a Net Creditor? New Estimates of Capital Flight from Severely Indebted Sub-Saharan African Countries, 1970-96," Journal of Development Studies, Taylor & Francis Journals, vol. 38(2), pages 27-56.
- Devarajan, Shantayanan & Miller, Margaret J. & Swanson, Eric V., 2002. "Goals for development : history, prospects and costs," Policy Research Working Paper Series 2819, The World Bank.
- Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 495-525, May.
- 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 363-89, September.
When requesting a correction, please mention this item's handle: RePEc:kud:kuiedp:0718. 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: (Thomas Hoffmann)
If references are entirely missing, you can add them using this form.