aid dispersion measurement in principle and practice summary excessive dispersion of development assistance has been high on the paris agenda on aid effectiveness however there is no agreement in the existing literature on how aid dispersion should be measured and few studies of the extent of the problem we argue for using the theil index for both recipients and donors this relative inequality measure has a major advantage it allows for a perfect decomposition into variation between and within entities exploiting this property we can rank official donors and recipients not only in terms of the total spread but also assess the contributions of geographic and sectoral dispersion we provide a detailed picture of developments along various dimensions globally as well as for countries income groups and regions over 1998 13 we further distinguish between bilateral and multilateral donors consistent with other studies using more limited samples we find little effect of the paris agenda overall aid is more fragmented in sub saharan africa and in the poorest countries globally as well as for most donor and recipient countries between variation is the main driver of the spread lending support to the geographic concentration policies many donor countries have adopted bilateral aid has been somewhat more dispersed than multilateral aid and in both cases the large number of donors controlling similar shares of total funds is a major driver of the total spread the latter suggests that concentration could also be achieved through a reduction of the number of actors on the donor side of the aid industry a perspective that previous studies using other measures have been unable to capture

commodity prices trade and poverty in uruguay abstract the 2006 2008 food price spike raised concerns about the impact of high commodity prices on poverty in developing countries this paper addresses these concerns in relation to uruguay a small country that exports agricultural commodities and imports fuels applying a general equilibrium model we find that as a whole an increase in commodity prices has a positive effect on the economy of uruguay benefits obtained through a growth in export activities are partially outweighed by an increase in crude oil prices in this context extreme poverty increases as in other countries the increase in food prices affects the already poor population who become even poorer this fact highlights the need for policies that mitigate the negative effects of price shocks

when is foreign aid policy credible aid dependence and conditionality the author studies foreign aid policy within a principal agent framework he shows that one reason for foreign aid s poor overall record may be a moral hazard problem that shapes the aid recipient s incentive to undertake structural reform the model s basic prediction is a two way relationship disbursements of foreign aid are guided in part by the needs of the poor anticipating this recipients have little incentive to improve the welfare of the poor preliminary econometric work shows that the data support this hypothesis in principle conditionality could partly solve this problem but only if the donor can make a binding commitment to increase disbursements in good relative to bad states without such a commitment technology aid disbursements remain guided by the needs of the poor and recipient countries maintain a low effort to reduce poverty contrary to the conventional wisdom found in the aid literature the author shows that the welfare of all parties might be improved by using tied project aid or by delegating part of the aid budget to an international agency with less aversion to poverty

status the distribution of wealth and growth we analyze a simple model of endogenous growth in which individuals care about both consumption and their rank in the distribution of wealth we show that the steady growth rate of the economy increases with both the strength of the status seeking motive and the initial equality of the wealth distribution contrary to the basic model of endogenous growth the equilibrium growth rate is not necessarily smaller than in the social optimum and we identify the circumstances under which the two coincide

international coordination and the effectiveness of aid this paper discusses and seeks to quantify the effects of improved donor coordination on aid effectiveness empirical estimates are first provided of the reductions in transaction costs that can be achieved by better donor coordination via concentration to fewer partner countries and a shift from project aid to programme based approaches further estimates are presented showing how much could be gained in terms of poverty reduction by optimizing aid allocation across countries the potential gains of a coordinated reallocation would be huge but there are severe political implementation constraints still the overall conclusion of the paper is that there are huge potential gains from donor coordination

the origins of state capacity property rights taxation and politics economists generally assume that the state has sufficient institutional capacity to support markets and levy taxes this paper develops a framework where policy choices in market regulation and taxation are constrained by past investments in legal and fiscal capacity it studies the economic and political determinants of such investments demonstrating that legal and fiscal capacity are typically complements the results show that among other things common interest public goods such as fighting external wars as well as political stability and inclusive political institutions are conducive to building state capacity some correlations in cross country data are consistent with the theory

marketing margins and the welfare analysis of food price shocks abstract following the surge in world food prices of 2007 2008 there has been a revival of short run household welfare analysis that seeks to understand whether food price increases are beneficial or detrimental for households for a number of reasons including lack of data in some instances the short run analytical approach has embedded an assumption of equal percentage price changes for consumers and producers this assumption implies that food marketing costs change by the same percentage because an x percent change in both farm prices and consumer prices implies that there must also be an x percent change in their difference but this paper shows that most marketing costs are fixed not proportional and further that assuming proportional marketing costs leads to a bias towards finding negative impacts of higher food prices the magnitude of the bias is shown to be greater than that from failing to incorporate supply and demand responses to price changes and can be substantial relative to the effect estimated without incorporating the bias in addition the bias is not necessarily uniform across income classes thus failure to explicitly consider marketing margins has the potential to reverse the relative magnitudes of the impact on rich and poor

navigating the perfect storm reflections on the food energy and financial crises the closely interlinked food energy and financial crises pose a significant new challenge to the global effort to reduce poverty in 2008 food prices rose sharply in many countries and global poverty and hunger levels increased quite markedly the good news is that the agricultural supply response in many countries was also strong the impacts of the financial crisis on poor countries have yet to fully roll out but it is clear that more people have fallen into poverty and more are suffering from hunger lastly there are strong indications that the global food system is fundamentally changing in a number of dimensions biofuels are here to stay and energy and food prices appear to have adjusted to a higher equilibrium and will in turn raise the prospects of renewed volatility in agricultural commodity markets trade protection has also resurfaced but so have renewed investments in agriculture these fundamental shifts bring with them opportunities and risks that require internationally coordinated responses with strong national buy in as well as timely and relevant research

wealth seeking reconsidered abstract if individuals are interested in their relative wealth position they engage in contests for wealth this leads to a steady state with overaccumulation in a simple growth model it is shown that if some individuals are engaged in wealth seeking activity but others are not the latter might benefit however wealth seeking is not welfare enhancing under usual assumptions concerning production technology the steady state equilibrium is characterized by a marginal productivity of capital that is below the steady state rate of time preference and by emergence of a class structure

why conditional aid does not work and what can be done about it abstract this paper studies a simple reform that introduces ex post incentives for the donor to reward good policies contrary to existing practices instead of committing aid to each recipient ex ante and making aid conditional on reform the donor centralizes the disbursement decision by committing aid to a group of countries the actual amount disbursed to each individual country would depend on its relative performance this explicit linkage of the allocation and disbursement decisions has two important advantages as compared to present practices first it raises the opportunity cost of disbursing aid ex post thereby giving the donor stronger incentives to reward good policies second competition among recipients allows the donor to make inferences about common shocks which otherwise conceal the recipient s choice of action this enables the donor to give aid more efficiently

global market shocks and poverty in vietnam the case of rice world food prices have experienced dramatic increases in recent years these shocks affect food importers and exporters alike vietnam is a major exporter of rice and rice is also a key item in domestic production employment and consumption accordingly rice price shocks from the world market have general equilibrium impacts and as such their implications for household welfare are not known ex ante in this paper we first present a simple framework for understanding the direct and indirect welfare effects of a global market shock of this kind second we quantify the transmission of the price shock from global indicator prices to domestic markets third we then we use an applied general equilibrium age model to simulate the effects of domestic price changes in more detail fourth a recursive mapping to a large nationally representative living standards survey permits us to identify in detail the ceteris paribus effects of the shock on household incomes and welfare in this analysis interregional and intersectoral adjustments in the labor market emerge as key channels transmitting the effects of global price shocks across sectors and among households

aid fragmentation and effectiveness what do we really know summary aid fragmentation is widely recognized as being detrimental to development outcomes we reinvestigate the impact of fragmentation in the context of growth bureaucratic policy and education focusing on a number of conceptually different indicators of fragmentation and paying attention to potentially heterogeneous effects across countries sectors and channels of influence our systematic and detailed reexamination of existing empirical studies shows that this differentiation is crucial in some sectors such as primary education donor concentration or limiting donor numbers appear to be detrimental rather than beneficial for development outcomes in other areas we find the expected negative effect but only when we conceptualize fragmentation as a lack of lead donors too limited concentration rather than in terms of donor numbers in all cases sufficient initial administrative capacity in recipient countries prevents the negative and reinforces the positive effects of fragmentation this stresses the importance of questioning the sweeping conclusions drawn by much of the previous literature based on what we currently know generalizing judgments about the effect of aid fragmentation may be misleading

welfare effects of an export tax thailand s rice premium an empirically based applied general equilibrium model is used to study the welfare and distributional effects of an export tax when the implementing country possesses some monopoly power in the world market a method is demonstrated through which a general equilibrium model can be used to find the optimal value of a tax or subsidy the approach makes it possible to conduct the welfare analysis of a particular intervention in an explicit second best context to study its income distributional implications and to explore the sensitivity of the results to variations in key behavioral parameters structural assumptions and the government s distributional objectives copyright 2001 oxford university press

fertilizer subsidies and food self sufficiency in indonesia indonesia is a net importer of almost all of its staple foods national self sufficiency in food especially the main staple rice is a core objective of economic policy poverty reduction is also a core policy objective since the 1970s indonesia has used agricultural input subsidies especially on fertilizer to stimulate agricultural production largely in pursuit of the goal of rice self sufficiency more recently it has also used output protection especially in rice for the same purpose this article utilizes a multisectoral multihousehold general equilibrium model of the indonesian economy to study the trade offs between the goals of self sufficiency and poverty reduction when two alternative means are used to achieve them a fertilizer subsidy on the one hand and output protection on the other it does this by analyzing the aggregate and distributional effects of these two sets of policies and by comparing their effects with nonintervention the analysis shows that in terms of its effects on poverty a fertilizer subsidy can be a more effective instrument for achieving the goal of rice self sufficiency than final product import restrictions

world food prices and poverty incidence in a food exporting country a multihousehold general equilibrium analysis for thailand a multisectoral multihousehold general equilibrium model of the thai economy is used to analyze the implications of recent increases in international food prices higher food prices especially staple grains worsen poverty incidence in thailand despite the presence of large numbers of poor farmers many of whom benefit from higher prices the positive effect on the welfare of poor farmers is dominated by the negative effect on poor consumers of the recent price increases for rice sugar cassava maize soybeans urea and petroleum the increases in rice prices raise poverty incidence the most despite thailand being the world s largest rice exporter

political conditionality and foreign aid this article argues that a new generation of political conditionalities has emerged during the last decade this requires an expansion of the original definition and research agenda beyond the traditional questions of use and effectiveness however there is also a need to dig deeper into the dynamics surrounding political conditionalities particularly the bargaining processes and outcomes along the aid chain from domestic donor politics donor harmonization fora policy dialog spaces to the political economy of recipient institutional reform and donor coping strategies because they influence the set up use follow up purpose and effectiveness of pcs

the global food crisis disaster opportunity or non event household level evidence from cote d ivoire summary using 2008 lsms data for cote d ivoire we study the welfare implications of the price increase of key imported staple food rice and consider the consumption smoothing effect of locally produced food and cash crop varieties while middle income urban households are adversely affected by rising rice prices relatively poor rural households benefit availability of local staple alternatives leads to further income redistribution from net consumers toward net producers of staples by contrast the ability to generate income from tropical cash crops not only improves the welfare of rural households but helps smooth the consumption of urban households

politics and the effectiveness of foreign aid abstract critics of foreign aid programs have long argued that poverty reflects government failure in this paper i test predictions for aid effectiveness based on an analytical framework that relates aid effectiveness to political regimes i find that aid does not significantly increase investment nor benefit the poor as measured by improvements in human development indicators but it does increase the size of government the impact of aid does not vary according to whether recipient governments are liberal democratic or highly repressive but liberal political regimes and democracies ceteris paribus have on average 30 lower infant mortality than the least free regimes this may be due to greater empowerment of the poor under liberal regimes even though the political elite continues to receive the benefits of aid programs an implication is that short term aid targeted to support new liberal regimes may be a more successful means of reducing poverty than current programs

status the distribution of wealth private and social attitudes to risk this paper supposes an individual cares about his her own wealth not only directly but also via the relative standing that this wealth induces the implications for risk taking are investigated in particular such a model provides a natural explanation of the concave convex concave utility described by friedman and savage however there are a number of key differences between the present model and any model based on own wealth alone for example an equilibrium wealth distribution here may have a middle class further the status interaction involves an externality and an equilibrium wealth distribution may be pareto inefficient but also about the implied relative standing in the distribution of wealth has a long but checkered history an early exponent of such ideas was of course veblen 1899 it is indeed a notion which most economists reject albeit usually without explicit comment a notable and articulate exception however is frank 1985 for example see also the references frank cites on pp 33 34 it is however a notion with substantial intuitive appeal and it seems useful to ascertain its consequences before coming to a final judgement as to its merits the present paper is concerned with deriving the consequences of such valuation of status for risk taking what seems to be the sharpest possible model is adopted here this assumes that what is essentially ordinal rank in the wealth distribution enters von neumann morgenstern utility as an argument in addi tion to wealth itself thus higher wealth increases utility not only directly but also indirectly via higher status in the interests of both simplicity and drama it is typically assumed here that all individuals have identical utility functions which are concave in wealth but convex in status section 2 discusses how the model provides a natural explanation of the fundamental phenomenon addressed by friedman and savage 1948 that individuals may simultaneously purchase insurance and participate in lotteries although each individual here has a utility function which is concave in wealth itself utility can nevertheless be convex in wealth over some range when the indirect effect via status is included this effect is enhanced by the convexity of utility in status but will follow in any case if increasing wealth entails moving up in status much more rapidly than losing wealth entails moving down it is shown

contracting for aid abstract foreign aid is analyzed as a contract where the north gives a transfer to the south in return for poverty reduction regarded as an international public good the issue of conditionality is first discussed in a moral hazard framework and then under asymmetric information about the degree of altruism of the government of the south additional actors like local ngos and multilateral aid institutions are then added to the model the optimal contracts to avoid free riding or collusion are then presented