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Big Push versus Absorptive Capacity: How to Reconcile the Two Approaches

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  • Guillaumont, Patrick
  • Guillaumont Jeanneney, Sylviane

Abstract

In this paper we examine whether absorptive capacity can constitute sufficient justification for rejecting the proposal of a large aid increase to support the ?big push?. We argue that the probability of a poverty trap exists for many countries, in particular the least developed countries (LDCs) and that an increase in aid is relevant for them. Moreover we show that the decrease in marginal aid returns is slower in vulnerable countries, which supports the rationale to include vulnerability as one of the aid allocation criteria. We examine the main obstacles to absorptive capacity, such as disbursement constraints and short-term bottlenecks, macroeconomic problems, including loss in competitiveness and macroeconomic volatility, as well as the weakening of institutions. The general conclusion that we draw for reconciling the two approaches is that absorptive capacity strongly influenced by aid itself or by its modalities. The big push and absorptive capacity approaches cannot be reconciled without aid reform supported by an aid increase. First, what is needed is to balance the utilization of aid between activities that are directly productive and those that are social ...

Suggested Citation

  • Guillaumont, Patrick & Guillaumont Jeanneney, Sylviane, 2007. "Big Push versus Absorptive Capacity: How to Reconcile the Two Approaches," WIDER Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:dp2007-05
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Patrick GUILLAUMONT, 2008. "Adapting Aid Allocation Criteria to Development Goals," Working Papers P01, FERDI.
    2. Patrick GUILLAUMONT, 2009. "Aid effectiveness for poverty reduction: macroeconomic overview and emerging issues," Working Papers P05, FERDI.
    3. Patrick GUILLAUMONT & Sylviane GUILLAUMONT JEANNENEY, 2009. "State fragility and economic vulnerability: What is measured and why?," Working Papers P07, FERDI.
    4. Sylviane GUILLAUMONT JEANNENEY, 2008. "Les fondements éthiques de l’aide publique au développement : une application à la France," Working Papers 200809, CERDI.
    5. George Mavrotas & Bazoumana Ouattara, 2007. "Aid Modalities and Budgetary Response: Panel Data Evidence," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 143(4), pages 720-741, December.
    6. L. Chauvet & H. Ehrhart, 2015. "Aid and Growth. Evidence from Firm-Level Data," Working papers 563, Banque de France.
    7. Bandyopadhyay, Subhayu & Lahiri, Sajal & Younas, Javed, 2015. "Financing growth through foreign aid and private foreign loans: Nonlinearities and complementarities," Journal of International Money and Finance, Elsevier, vol. 56(C), pages 75-96.
    8. repec:unu:wpaper:wp2012-31 is not listed on IDEAS

    More about this item

    Keywords

    absorptive capacity; big push; aid effectiveness; poverty trap; institutions;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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