Donor policy rules and aid effectiveness

TY - JOUR

T1 - Donor policy rules and aid effectiveness

AU - Dalgaard, Carl-Johan Lars

N1 - JEL classification: O41, F35

PY - 2008

Y1 - 2008

N2 - The present paper examines the macroeconomic impact of aid, by introducing endogenous aid allocations into a neoclassical growth framework. On this basis it is shown that donor policies can have important implications for the trajectory of recipients' GDP per capita. Depending on specific donor policy choices, aid disbursements may lead to faster transitional growth, stagnation or cyclical growth. Moreover, the analysis also suggests that donor policies may be part of the reason why foreign aid is not found to be uniformly effective in raising long-run productivity across recipients

AB - The present paper examines the macroeconomic impact of aid, by introducing endogenous aid allocations into a neoclassical growth framework. On this basis it is shown that donor policies can have important implications for the trajectory of recipients' GDP per capita. Depending on specific donor policy choices, aid disbursements may lead to faster transitional growth, stagnation or cyclical growth. Moreover, the analysis also suggests that donor policies may be part of the reason why foreign aid is not found to be uniformly effective in raising long-run productivity across recipients

KW - Faculty of Social Sciences

KW - economic growth

KW - aid allocation

U2 - 10.1016/j.jedc.2007.07.002

DO - 10.1016/j.jedc.2007.07.002

M3 - Journal article

SN - 0165-1889

VL - 32

SP - 1895

EP - 1920

JO - Journal of Economic Dynamics and Control

JF - Journal of Economic Dynamics and Control

IS - 6

ER -