aid volatility policy and development summary we build on bulir and hamann s analysis of aid volatility bulir a hamann j 2003 aid volatility an empirical assessment imf staff papers 50 1 64 89 bulir a hamann j 2008 volatility of development aid from the frying pan into the fire washington dc imf paper submitted to this special section showing that the conclusions reached depend on the dataset used their argument that the poorest countries have the highest volatility appears not to be correct the impact of volatility on growth is negative overall but differs between positive and negative volatility the mix between responsive components of aid for example programme aid and proactive components for example technical assistance is important finally we conclude that measures which increase trust between donor and recipient and reductions in the degree of donor oligopoly reduce aid volatility without obviously reducing its effectiveness

foreign aid tariffs and nontraded private or public goods abstract the possibility of transfer paradoxes or immiserizing growth in tariff ridden small open developing countries with a nontraded goods sector is analysed in four models a short run sector specific factor model a dual economy model capital is mobile between some but not all sectors a long run model factors are mobile between all sectors and a model with public goods several results of the received literature on transfer paradoxes and or immiserizing growth in distorted small open economies are generalized to nontraded private and public goods allowing for intersectoral factor mobility or immobility

aid and sectoral growth evidence from panel data this article examines empirically the proposition that aid to poor countries is detrimental for external competitiveness giving rise to dutch disease type effects at the aggregate level aid is f

optimal prices for alpine ski passes abstract the purpose of this paper is to examine the relationship between price and demand and to determine the effect of variable pricing on ski resort revenues we use data from a survey of existing skiers at three ski resorts in the inland region of norway to estimate price response functions based on a number of characteristics including day of week and distance to the resort the various price response functions are subsequently used to calculate optimal prices for each subset of skiers according to their differing characteristics the results show that ski resorts have the potential to increase their total revenues substantially by adopting a more dynamic approach to pricing thus our results provide academic support for the findings of ski resorts that have implemented such pricing strategies

does aid affect governance why is there little robust evidence that foreign aid significantly enhances the economic growth of poor countries the search for an explanation is becoming immensely important as industrial countries are being exhorted to increase their aid budgets in order to help developing countries achieve the millennium development goals perhaps one should not expect an impact on growth from the mere infusion of additional capital into a country but perhaps any beneficial effects are offset by adverse spillover effects and academic focus should shift to determining what these are and how to mitigate them in this regard figure is suggestive we plot the log of the manufacturing to gross domestic product gdp ratio in a country against the log of the ratio of aid received to gdp for that country for two separate time periods the late 990s and the early 980s conditional on a number of variables as the figure suggests the more aid a country has received the smaller its share of manufacturing the coefficient estimate suggests that a percentage point increase in the ratio of aid to gdp is associated with a reduced share of manufacturing in total gdp of about 0 2 to 0 3 percentage points

does foreign aid increase private investment evidence from panel cointegration this article uses panel cointegration and causality techniques to examine the long run relationship between foreign aid and private investment our main result is that aid has a statistically significant negative effect on private investment this result is robust to outliers different measures and forms of aid sample selection and the sample period in addition we find that long run causality runs in both directions suggesting that an increase in aid reduces private investment and that in turn higher private investment leads to lower aid inflows

on the empirics of foreign aid and growth the present paper re examines the effectiveness of foreign aid theoretically and empirically using a standard olg model we show that aid inflows will in general affect long run productivity the size and direction of the impact may depend on policies deep structural characteristics and the size of the inflow the empirical analysis investigates these possibilities overall we find that aid has been effective in spurring growth but the magnitude of the effect depends on climate related circumstances finally we argue that the collier dollar allocation rule should be seriously reconsidered by donor agencies if aid effectiveness is related to climate the usefulness of foreign aid in promoting growth in developing countries has been an area of controversy ever since rosenstein rodan in 1943 advocated for aid to eastern and south eastern europe browsing through successive editions of a leading textbook in development economics provides a telling illustration of how the confidence in aid effectiveness dwindled over the years in the first edition of leading issues in economic development meier 1964 dedicated a full 18 page section to the issue of foreign aid he started out asking how much aid by the time of the sixth edition meier 1995 the treatment of foreign aid had been cut into half and the questions in focus were why official assistance and does aid work in the 2000 edition meier and rauch 2000 foreign aid is not even listed in the index

can vouchers reduce elite capture of local development projects experimental evidence from the solomon islands abstract external financing of local public goods can potentially create political resource curses by reducing citizen oversight exacerbating elite capture and producing policy outcomes that are sub optimal for the general population this paper experimentally tests a novel mechanism that seeks to mitigate elite capture of local development projects control communities are provided with block grants to fund local public goods while households in treatment communities are provided with vouchers that they may either contribute to a public good or redeem at a discount for a private capital good we find that the use of vouchers as a mechanism for aid delivery increases community participation in local public decision making changes the nature of allocation outcomes and improves community satisfaction with allocation outcomes

in aid we trust hearts and minds and the pakistan earthquake of 2005 in 2005 an earthquake in northern pakistan led to a significant inflow of international relief groups four years later trust in europeans and americans was markedly higher among those exposed to the earthquake and the relief that followed these differences reflect the greater provision of foreign aid and foreigner presence in affected villages rather than preexisting population differences or a general impact of disasters on trust we thus demonstrate large scale durable attitudinal change in a representative muslim population trust in westerners among muslims is malleable and not a deeply rooted function of preferences or global as opposed to local policy and actions

consequences of aid volatility for macroeconomic management and aid effectiveness we conclude that individual aid sector volatility matters as well as total aid volatility easily the most important contributor to total volatility is debt aid the most volatile aid sectors per se include debt industry and humanitarian and the least include education and health in several sectors volatility appears to have peaked around 2006 within individual countries sector volatility is often corrected for in the following period there are also sometimes knock on effects on other sectors finally we examine the impact of sector aid and aid volatility on school completion rates death rates internet usage and mobile phone subscriptions

the generalized theory of transfers and welfare bilateral transfers in a multilateral world paul samuelson s 1952 1954 classic papers on the transfer problem addressed two separate analytical issues the positive effect of a transfer on the terms of trade and the welfare effect of the transfer on the donor and the recipient since then a considerable body of literature has grown up on the positive analysis while samuelson 1954 himself had extended the 2 x 2 x 2 free trade analysis to allow for tariffs and transport costs subsequent writers have analyzed other extensions of the model for example to allow for nontraded goods as with leisure in samuelson 1971 or general nontraded goods in john chipman 1974 and ronald jones 1970 1975 remarkably however the welfare analysis of transfers has not paralleled these developments since wassily leontief 1936 produced an example of immiserizing transfer from abroad and samuelson 1947 argued that the example required market instability the proposition that has monopolized attention has been that a transfer in the conventional 2 x 2 x 2 model in its free trade version cannot immiserize the recipient or enrich the donor as long as world markets are stable in the walras sense interestingly samuelson 1954 who did extend the positive analysis to include tariffs did not go on to ask whether immiserization of the transfer recipient and hence symmetrically enrichment of the donor in a two country model could now arise consistent with market stability recently the welfare analysis of transfers has been extended in two different directions both apparently unconnected and both yielding the conclusion that transfers from abroad can be immiserizing and that the donor may improve its welfare despite market stability one route to this conclusion has been the introduction of a third economic agent or country that is outside of the transfer process in the appendix of his 1960 paper analyzing the interaction between trade policy and income distribution harry johnson discussed the possibility of welfareparadoxical redistribution between two factor income classes capital and labor in an open economy thereby providing what can be interpreted as a treatment of the threeagent transfer problem for the case in which donor and recipient are both completely specialized in the ownership of a single different factor an independent analysis of the three agent transfer problem using a restrictive model with given endowments of goods and fixed coefficients in consumption was also undertaken in an important paper by david gale 1974 2 brecher and bhagwati bhagwati department of economics columbia university new york ny 10027 brecher department of economics carleton university ottawa on kis 5b6 hatta department of political economy the johns hopkins university baltimore md 21218 we thank the national science foundation grant no 524718 for partial financial support of the research underlying this paper the paper was written when brecher and hatta were visiting columbia university 1981 82 gratefully acknowledged are helpful comments and suggestions from john chipman avinash dixit jacques dreze robert feenstra jacob frenkel ronald jones murray kemp andreu mas colell michael mussa john riley lars svensson and robert willig from anonymous referees and from seminar participants at berkeley harvard minnesota rochester chicago and the university of california los angeles after the present paper was submitted for publication and following its presentation at rochester our attention was drawn to this appendix which was noticed by a student of ronald jones subsequently we learned from makoto yano that motoshige itoh had pointed out an important related paper by ryuotaro komiya and t shizuki 1967 whose condition 11 for the johnson case anticipated our equation 12 below we are grateful for having both of these references brought to our attention 2 gale constructs an example in which the donor is enriched along with the recipient furthermore this immediately implies that a reverse transfer will immis

does foreign aid really raise per capita income a time series perspective we analyze the relationship between per capita income and foreign aid we employ annual data and five year averages and carefully examine the time series properties of the data panel estimations with dynamic feasible generalized least squares dfgls show that aid generally has an insignificant or minute negative significant impact on per capita income particularly in highly aid dependent countries this holds true for countries with different levels of human development and income as well as for different regions we also find that aid has a small positive impact on investment but a significant negative impact on domestic savings crowding out and the real exchange rate appreciation jel classification f35 o11 c23 c51 on analyse la relation entre le revenu per capita et l aide etrangere on utilise des donnees annuelles et des moyennes quinquennales et on examine les proprietes de ces series chronologiques des estimations d un modele dynamique utilisant des donnees de panel a l aide de la methode des moindres carres quasi generalises montrent que l aide a generalement un effet negatif minime ou insignifiant sur le revenu per capita particulierement dans les pays qui dependent beaucoup de l aide etrangere ce resultat tient tant pour des pays a divers niveaux de developpement et de revenus que pour differentes regions on decouvre que l aide a un petit effet positif sur l investissement mais un effet negatif significatif sur l epargne effet d encombrement et sur le taux de change reel appreciation

credit constraints and growth gains from governance this paper contributes to the governance literature by analyzing the specific mechanisms through which governance affects economic growth the credit channel specifically it investigates the grow

the african political business cycle varieties of experience abstractwe seek to understand both the incidence and the impact of the african political business cycle in the light of a literature which has argued that with major extensions of democracy since the 1990s the cycle has both become more intense and has made african political systems more fragile with the help of country case studies we argue first that the african political business cycle is not homogeneous and occurs relatively infrequently in so called dominant party systems where a pre election stimulus confers little political advantage secondly we show that in those countries where a political cycle does occur it does not necessarily cause institutional damage whether it does or not depends not so much on whether there is an electoral cycle as on whether this cycle calms or exacerbates fears of an unjust allocation of resources in other words the composition of the pre election stimulus in terms of its allocation between different categories of voter is as important as its size

aid and taxation in ethiopia abstractthe relation between aid and taxation is largely contested in the literature on the one hand aid may act as a substitute for tax revenue and thus have a crowding out effect it can also have a detrimental effect on domestic tax institutions on the other hand it can promote and support tax mobilisation through policy advice technical assistance and conditionality in addition to more indirect channels the case of ethiopia supports the existence of a positive relation between aid and tax which occurs mainly through policy advice and technical assistance rather than conditionality this finding is grounded in both quantitative and qualitative analysis

aid volatility and poverty traps abstract this paper studies the impact of aid volatility in a two period model where production may occur with either a traditional or a modern technology public spending is productive and time to build requires expenditure in both periods for the modern technology to be used the possibility of a poverty trap induced by high aid volatility is first examined in a benchmark case where taxation is absent the analysis is then extended to account for self insurance taking the form of a first period contingency fund financed through taxation an increase in aid volatility is shown to raise the optimal contingency fund but if future aid also depends on the size of the contingency fund as a result of a moral hazard effect on donors behavior the optimal policy may entail no self insurance

what is the aggregate economic rate of return to foreign aid in recent years academic studies have been converging towards the view that foreign aid promotes aggregate economic growth we employ a simulation approach to i validate the coherence of empirical aid growth studies published since 2008 and ii calculate plausible ranges for the rate of return to aid our results highlight the long run nature of aid financed investments and the importance of channels other than accumulation of physical capital we find the return to aid lies in ranges commonly accepted for public investments and there is little to justify the view that aid has had a significant pernicious effect on productivity

are there negative returns to aid the world bank report assessing aid assumes that an inflow of aid above a certain level starts to have negative effects in this analysis we empirically test this assumption we find evidence for negative returns to aid at high levels of aid inflows however the results are sensitive to both the countries included in the sample and model specification moreover the turning point above which aid starts to have a negative effect on growth seems to be much higher than assumed in the background calculations for assessing aid

mechanisms of the aid curse lessons from south korea and pakistan abstractrecently scholars have argued that far from contributing to development foreign aid hinders development but in the 1960s the east asian countries developed rapidly despite receiving large amounts of aid to examine why aid seems to undermine development in some cases but not in others we conduct a detailed comparison of the mechanisms of the aid curse in south korea and pakistan we show that south korea saw astonishing levels of corruption but this did not hinder its development and pakistan had a strong bureaucracy which did not help it to grow the key difference between the two countries was in the strength of their tax systems foreign aid in the context of underdeveloped tax administration leads to increasing cycles of debt that undermine development when foreign aid arrives in the context of commitment to strong taxation a country can avoid the aid curse

importance of early snowfall for swedish ski resorts evidence based on monthly data abstract since the early 1970s sweden has experienced an almost uninterrupted surge in demand for downhill skiing however from the 2009 2010 season lift ticket sales have stagnated with the use of monthly data this study investigates the role of snow depth and economic factors in the demand for downhill skiing in sweden the empirical approach is based on a seemingly unrelated regression model allowing snow conditions but not economic factors to differ during the season the estimates show that an early season increase in natural snow depth by 10 cm raises the growth rate of lift ticket sales by 9 percentage points in the same period further the results indicate that downhill skiing is characterised by low income and price elasticities implying weak impacts on demand for such changes the price increase of lift tickets exceeds that of the inflation rate the recent decline in demand might indicate changed leisure preferences

aid and trade a donor s perspective abstract one reason donors provide foreign aid is to support their exports to aid recipient countries time series data for germany suggests an average return of between us 1 04 1 50 for each us dollar of aid spent by germany although this is well below previous estimates the value is robust to different specifications and econometric approaches interestingly we find strong evidence of crowding out between bilateral donors in the sense that bilateral aid from other eu members significantly reduces exports from germany to the recipients the evidence suggests that in the long run aid causes exports and not vice versa we discuss the implications these findings might have for aid volumes and allocation

fiscal composition and aid effectiveness a political economy model summary in the long run tax effort we argue determines the effectiveness of aid and this relationship operates simultaneously with the negative link in the opposite direction observed by brautigam and knack 2004 and others tax effort and the ability of the state to diversify its taxation structure we find are significantly linked to growth and poverty indicators the key message for policy is that a broadening of the tax structure in low income countries is crucial in order to enable those countries to escape from the weak state low tax trap and to make aid effective

development aid and climate finance this paper discusses the implications of climate change for official transfers from rich countries the north to poor countries the south when the motivation for transfers is ethical rather than strategic traditional development transfers to increase income and reduce poverty are complemented by new financial flows to reduce greenhouse gas emissions mitigation transfers and become climate resilient adaptation transfers we find that in the absence of barriers to adaptation mitigation or development climate change will make isolated transfers less efficient a large part of their intended effect to increase income reduce emissions or boost climate resilience dissipates as the south reallocates its own resources to achieve the mitigation adaptation and consumption balance it prefers only in the case of least developed countries which are unable to adapt fully due to income constraints will adaptation support lead to more climate resilience in all other cases if the north wishes to change the balance between mitigation adaptation and consumption it should structure its transfers as matching grants which are tied to the south s own level of funding alternatively the north could provide an integrated climate compatible development package that recognizes the combined climate and development requirements of the south if the aim is to increase both mitigation and adaptation in the south development assistance that increases the income level can be an effective measure but only if there is an international agreement and the recipient country is not income constrained if the recipient country is very poor development aid may reduce adaptation effort

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

u turns and full circles two decades of agricultural reform in malawi 1981 2000 abstract this paper traces the evolution of malawi s agricultural policy over the past two decades during this period the world bank has played a key role in shaping policy reform through its adjustment loans three distinct reform phases can be identified 1981 87 when policy was dominated by the dogmatism of the world bank s pricist and state minimalist policies 1988 94 when a more flexible position was taken by both the bank and the malawi government both of whom acknowledged the structuralist critique of earlier policies and 1994 to the present when the reform process in agriculture became more politicized and a schism developed between the bank and the government this latter period is used to illustrate some of the unresolved policy issues pertaining to similar low income agrarian economies

aid effectiveness and the politics of personalism this article examines how political institutions that provide an incentive to cultivate a personal vote condition the relationship between foreign aid and economic growth in developing country democracies politicians in aid recipient countries with high levels of personalism are more likely to pursue corruption and target government spending to narrow constituencies because personalism affects these outcomes it provides incentives to use foreign aid for politically motivated spending at the expense of investing foreign aid in growth promoting public goods using panel data from 61 aid recipient democracies from 1961 to 2001 the author finds that aid increases growth in democracies with less personalist institutions but decreases growth in countries with high personalism the author also shows that personalism conditions the relationship between aid and the composition of government spending aid increases spending on public goods relative to narrow particularistic goods in countries with low person

aid volatility and donor recipient characteristics in difficult partnership countries one factor limiting aid effectiveness is its volatility we examine aid volatility in 66 countries over 1975 2004 paying particular attention to the characteristics of difficult partnership countries and making a distinction between sector aid and total aid we explore whether weak recipient institutions and policies are associated with greater volatility allowing for differences in donor characteristics institutional quality and macroeconomic stability affect the stability of all kinds of aid as does reliance on a small number of donors however the relative importance of these effects varies across different aid types

debt relief and governance quality in developing countries summary in this paper we empirically discuss whether or not debt relief has been economically rational in the past 15 years from analyzing the determinants of debt relief our results suggest that governance quality did not play a role in the decision of creditor countries to forgive debt in the 1990s furthermore even the actual debt burden of highly indebted poor countries was not crucial in deciding whether or not debt forgiveness was granted rather debt relief followed a strong path dependence those countries whose debt had been forgiven in the first half of the 1990s were also granted debt forgiveness in the second half of the decade however this allocation pattern changed at the beginning of the 21st century when path dependence diminished and some dimensions of governance quality were taken into account by donor countries

can the world cut poverty in half how policy reform and effective aid can meet international development goals abstract poverty in the developing world will decline by about one half by 2015 if the trends of the 1990s persist most of this poverty reduction will occur in asia however while poverty will decline only slightly in africa effective aid could make a contribution to greater poverty reduction in lagging regions even more potent would be significant policy reform in these countries we develop a model of efficient aid in which flows respond to policy improvements that create a better environment for poverty reduction and effective aid we investigate scenarios of policy reform and efficient aid that point the way to how the world can cut poverty in half in every major region

welfare aspects of the transfer problem using the standard trade model with three countries and allowing for substitutability in both production and consumption this paper demonstrates that a country may gain by giving a transfer that the receiver may lose and that these two phenomena may appear at the same time this result is an extension of gale s example in a fixed coefficient model where he shows both transferer and transferee may become better off harming the third country and it is contrasted with the traditional welfare proposition whereby a giver is immiserized and a recipient is enriched

property rights protection corporate transparency and growth in countries with secure property rights corporate transparency improves investment efficiency and increases growth by alleviating information asymmetry however in countries with insecure property rights greater transparency can increase the risk of government expropriation therefore some firms that would benefit most from transparency cannot take full advantage of it as they set sub optimal transparency levels using data from 59 industries in 69 countries we find that in countries with weak property rights protection industries that would benefit the most from transparency exhibit worse investment efficiency and grow more slowly than industries that can efficiently operate at minimal levels of transparency

aid poverty reduction and the new conditionality the paper examines the effect of aid on poverty rather than on economic growth we devise a pro poor public expenditure index and present evidence that together with inequality and corruption this is a key determinant of the aid s poverty leverage after presenting empirical evidence which suggests a positive leverage of aid donors on pro poor expenditure we argue for the development of conditionality in a new form which gives greater flexibility to donors in punishing slippage on previous commitments and keys aid disbursements to performance in respect of policy variables which governments can influence in a pro poor direction

aid policies and growth the authors of this paper use a new database on foreign aid to examine the relationships among foreign aid economic policies and growth of per capita gdp in panel growth regressions for 56 developing countries and 6 four year periods 1970 93 they find that the policies that have a great effect on growth are those related to fiscal surplus inflation and trade openness they construct an index for those three policies and have that index interact with foreign aid they have instruments for both aid and aid interacting with policies they find that aid has a positive impact on growth in developing countries with good fiscal monetary and trade policies in the presence of poor policies aid has no positive effect on growth this result is robust in a variety of specifications which include or exclude middle income countries include or exclude outliers and treat policies as exogenous or endogenous they examine the determinants of policy and find no evidence that aid has systematically affected policies either for good or for ill they estimate an aid allocation equation and show that any tendency for aid to reward good policies has been overwhelmed by donors pursuit of their own strategic interests in a counterfactual they reallocate aid reduce the role of donor interests and increasing the importance of policy such a reallocation would have a large positive effect on developing countries growth rates

aid the public sector and the market in less developed countries a reply the article in this journal by mosley et al i987 concludes its analysis of aid effectiveness as demonstrating inability of development aid over more than twenty years to provide a net increment to overall growth in the third world p 636 this note purports to show that this conclusion which is ostensibly distressing as the authors claim is not warranted the section of the study which is the basis of the conclusion cited and the subject of this note is a cross section regression analysis full details of which are shown in mosley et al table 3 the note is concerned with the relation between the dependent variable specified as the growth rate of real gdp per cent per annum hereafter gdp and aid specified as a percentage of gdp hereafter aid the aid results with only two significant positive coefficients in one subsample certainly give no basis for claiming aid effectiveness in terms of gdp growth the intention in this note is to interpret the results which are assumed to be valid this is made possible by the fact that the authors have helpfully provided the full input set of mean values derived from the raw data from this it is possible to calculate the gdp aid relationship for each country for the second and third period the procedure for deriving these relationships is as follows for each country the mean values of the time series of gdp and aid are extracted from the data for i 960 70 and for i 970 80 using i 960 70 as the base the signs of the change in the levels of the gdp and aid mean values between periods are recorded this is repeated for i980 4 with i970 80 mean values as the base the relationship between the two signs is an indication of the effect of aid on gdp in the period in which the change in levels is effected thus in the case of an increase in aid being combined with a decrease in gdp the latter must have fallen relatively to the former and aid effectiveness is negative mutatis mutandis for the other three sign combinations thus generating the appropriate gdp aid relationship for each country in each period a frequency distribution of the four sign combinations relating to the full sample is presented in table i since the signs of the changes in the levels of gdp and aid are derived by making explicit the arithmetic relationship implicit in the data they form a valid base from which to draw conclusions without requiring any test of

the macroeconomic impact of aid volatility we analyse the impact of aid volatility on gdp gnp shares of expenditure given the level of aid positive and negative volatility reduce investment and government expenditure shares but the former reduces import share and the latter increases consumers expenditure share

donor competition for aid impact and aid fragmentation we show that donors that maximize relative aid impact spread their budgets across many recipient countries in a unique nash equilibrium this aid fragmentation result is robust to the introduction of fixed costs even if they are improbably large in equilibrium smaller donors have less fragmented aid and behave better from an efficiency viewpoint we present evidence that our theoretical results are in line with cross country correlations our analysis has important policy implications first short of ending donors maximization of relative aid impact agreements to better coordinate aid allocations are not implementable second since policies to increase donor competition in terms of aid effectiveness risk reinforcing relativeness they may well backfire as any such reinforcement increases aid fragmentation

aid nontraded goods and the transfer paradox in small countries this paper constructs a model of the transfer paradox for a small open economy with nontraded goods it demonstrates that increased production of nontraded goods can change their domestic price so as to offset the otherwise beneficial effect of aid and under certain conditions to create a transfer paradox even in a small country the model is estimated with time series data for 44 aid dependent countries for the period 1970 90 the results support the model and show that the nontraded goods expansion effect is more likely to cause immiserization than harry g johnson s 1967 tariff distorting export displacement effect

the dynamic implications of foreign aid and its variability abstract the paper examines the effects of aid and its volatility on consumption investment and the structure of production in the context of an intertemporal two sector general equilibrium model calibrated using data for aid dependent countries in africa a permanent flow of aid mainly finances consumption rather than investment consistent with the historical failure of aid inflows to translate into sustained growth large aid flows are associated with higher real exchange rates and smaller tradable sectors because aid is a substitute for tradable consumption aid volatility results in substantial welfare losses providing a motivation for recent discussions of aid architecture stressing the need for greater predictability of aid these results are also consistent with evidence from cross country regressions of manufactured exports presented later in the paper

tied aid and the paradoxes of donor enrichment and recipient impoverishment it is part of received doctrine that in a two country world without hindrance of commodity taxes or other distortions and with market stability assured international transfers necessarily harm the donor and benefit the recipient 2 however in the case of most non private international aid those conditions fail donors often require that aid be spent in a manner not closely related to private preferences in the recipient countries indeed not closely related to any well behaved preferences and they normally finance the aid by means of distorting taxation hence one cannot rule out by appeal to standard theorems the possibility that aid perversely leaves the donor better off and or the recipient worse off let us say that aid is tied in the recipient if it is spent inefficiently in terms of individual preferences and that aid is tied in the donor if it is financed inefficiently thus whether aid is tied is a question of how it is spent or financed it is not a question of the numeraire in terms of which aid is accounted nor of the form in which it is offered 3 evidently the definition of tying is uncommonly broad for example aid may be tied in the recipient not because the donor attaches strings but because the government of the recipient is incompetent or unrepresentative moreover the definition is relevant however the aid is applied whether to private or public goods whether to consumption or investment goods we follow the literature on the transfer problem in assuming that aid is spent on private consumption goods like hospital services and powdered milk this is a matter of convenience and continuity only 4 in the present note we seek to rework the economics of foreign aid under novel assumptions in particular allowance will be made for the possibility that aid is tied in whole or in part in the donor or in the recipient it will be verified that the donor may benefit and the recipient suffer and that these outcomes are com

aid and trade this paper surveys the recent theoretical and empirical literature that explores the relations between aid and trade and asks about the complementarity or substitution effects at work we distinguish between the effects of aid on trade flows and on trade policies of the donor as well as the recipient countries special focus is given on trade facilitation or aid for trade

booming sector and de industrialisation in a small open economy this paper presents a theoretical analysis of the dutch disease the phenomenon whereby a boom in one traded goods sector squeezes porfitability in other traded goods sectors both by directly bi

the impact of climate change on demand of ski tourism a simulation study based on stated preferences abstract climate change will affect tourism as one of the sectors most dependent on natural resources due to the strong dependency of many peripheral areas on tourism climate change has the potential to destabilize regional economies the objective of this paper is to assess the impacts of climate change on ski tourism demand a tourist survey n 1957 with a choice experiment conducted in 53 ski areas in austria provides the data for our analyses results show that snow is the most important factor for destination choice nevertheless preferences of respondents are heterogeneous measures that enhance price performance ratio i e lowering lift ticket prices and avoiding crowding turn out to be the most suitable compensation for suboptimal snow conditions as long as substitute ski areas with better snow conditions exist destinations with marginal snow conditions are likely to face severe demand losses up to 60 nevertheless dynamic pricing has the potential to compensate medium snow reliability if all destinations are affected by deteriorating snow conditions total demand reduces by 64 if snow reliability is low if these conditions and effects are limited to the beginning and the end of the ski season demand is projected to decline by 18

why china industrialized after england i introduction although industrialization first occurred in england it is thought that china not england may have been the world leader in technology at the time yet china did not industrialize until 150 yr after england and nearly a century after less advanced european countries this represents a puzzle because two sector neoclassical growth models such as hansen and prescott 2002 require that more technologically advanced countries industrialize at an earlier date and therefore cannot match the timing of industrialization across countries these models would require that china have significantly lower levels of total factor productivity tfp than england in 1800 which is at odds with the data table i presents different proxies for productivity since present day measures of tfp were not collected in the eighteenth century although it is impossible to definitively declare a technology leader these measures have led economists and historians to conclude that china may have held a slight lead over england in the eighteenth century 1 i modify hansen and prescott 2002 to account for differences in population density and conclude that industrialization is predicated upon increasing levels of tfp and population density by accounting for differences in population densities a heterogeneity not previously examined i accurately predict the timing of industrialization countries with comparable levels of tfp are seen to industrialize at similar population densities table 2 confirms that this was the case with china and england population densities were almost identical upon their respective industrializations 150 yr apart the next section describes the environment and section iii shows how heterogeneity in population density can account for the late industrialization of china section iv concludes ii environment the economy is an overlapping generation model with two production technologies it is a modified version of hansen and prescott 2002 with the addition of a country specific level of technology from parente and prescott 2004 and population density 5 there are three factors of production in the economy land labor and capital there are two types of firms agrarian firms that have access to a malthusian production technology y sub a t gamma sub a t k sup phi sub a t n sup mu sub a t l sup 1 mu phi sub a t that uses capital labor and land and industrial firms that have access to a solow production technology y sub m t gamma sub m t k sup theta sub m t n sup 1 theta sub m t that uses capital and labor both production technologies produce an identical aggregate good and firms face perfectly competitive markets for labor land capital and goods capital depreciates fully each period tfp evolves at the constant rate gamma sub a t gamma sup t sub a gamma sub a 0 in the agrarian sector and gamma sub m t epsilon sub i gamma sup t sub m gamma sub m 0 in the manufacturing sector where gamma sub j 0 is the initial level of tfp in sector j a m and gamma sub a gamma sub m such that the growth rate of tfp is identical across sectors prior to industrialization 6 epsilon sub i member of 0 1 represents the fraction of world tfp that has been absorbed by the manufacturing sector of country i with epsilon sub i 1 for the world technology leader agents live for two periods and choose labor investment in capital and land holdings when young and capital when old to maximize lifetime utility generation t agents choose k sub s t 1 l sub t 1 k sub m t 1 n sub m t n sub s t c sup t sub t c sup t sub t 1 to maximize lifetime utility 1 u sub t ln c sup t sub t beta ln c sup t sub t 1 subject to the budget constraints 2 mathematical expression not reproducible in ascii where agents have a single unit of labor to divide between the agrarian and manufacturing sectors and q

redesigning the aid contract donors use of performance indicators in uganda abstract the perceived failure of traditional ex ante conditionality has led to proposals for using performance indicators as a basis for aid allocations ex post conditionality in this article we assess the role of performance indicators and their impact on the aid contract between donors and the government of uganda in uganda the use of performance indicators has radically changed donor recipient relations by improving both program monitoring and donor coordination it has however not yet fundamentally changed the incentive structure in the aid contract to improve the incentive structure we propose a distinction between indicators used for monitoring and those designed to guide aid allocations

targeting aid to the needy and deserving nothing but promises by reallocating aid to where it is needed most and where a productive use is most likely donors could help alleviate poverty in developing countries the rhetoric of donors suggests that this insight has increasingly shaped the allocation of aid we assess the poverty and policy orientation of bilateral and multilateral aid in different ways in addition to presenting stylised facts based on bivariate correlations we apply a tobit model that captures both altruistic and selfish donor motives we find little evidence supporting the view that the targeting of aid has improved significantly most donors provide higher aid to relatively poor countries but so far the fight against poverty has not resulted in a stronger focus on needy recipients with favourable local conditions the estimation results reveal that the policy orientation of aid critically depends on how local conditions are measured in general however donors appear to be less policy oriented than poverty oriented the response of donors to changing institutional and policy conditions in recipient countries turns out to be fairly weak we reject the proposition that multilateral aid is clearly superior to bilateral aid in terms of rewarding poor countries with better policies and institutions

how should structural adjustment programs be designed abstract more than seven years have elapsed since the onset of the generalized debt crisis of 1982 yet the affected countries have still not managed to stabilize their economies these countries must now attempt structural adjustment in the midst of pervasive macroeconomic and political instability structural adjustment packages should be designed with this reality in mind this paper argues that structural adjustment programs should strive for sustainability rather than the economic liberalization that they presently stress illiberal policies which do not damage overall macro stability are preferable to liberal policies which are inherently unsustainable or engender macro instability liberalization programs that are not sustainable are likely to bring few benefits but have high costs in terms of private investment the paper discusses some of the chief implications of this opinion for the design of adjustment programs

markets in china and europe on the eve of the industrial revolution prevailing views suggest the industrial revolution began in europe because markets had gradually become more efficient and by the 18th century the scope of economic activity was far larger than in other parts of the world this paper compares the actual performance of markets in europe and china two regions of the world that were relatively advanced in the pre industrial period but would start to industrialize about 150 years apart the analysis covers economies that account for about two fifths of the world s population in the mid 18th century and it considers some three centuries of data our findings suggest that relative levels of market function in china and europe were similar prior to the industrial revolution higher efficiency in europe is seen only in the nineteenth century when industrialization was already underway moreover these improvements occurred in a dramatic and sudden fashion further casting doubt on an evolutionary view of market development rather than being a key condition for subsequent growth gains in efficiency appeared simultaneously with the turning point of modern growth we discuss the implications of these findings for a number of explanations for long run growth and the industrial revolution

darlings and orphans interactions across donors in international aid we examine how bilateral aid flows of an individual donor to a recipient depend on aid flows from all other bilateral and multilateral donors to that recipient we thereby assess to what extent issues including donor coordination free riding selectivity specialization and common donor interests drive bilateral aid allocations we find that others bilateral flows lead to a significant increase in aid flows from a particular donor but primarily within a given year the effects are particularly pronounced for large donors and so called darling recipients overall the results suggest that herding is a dominant feature of aid inter relationships this article is protected by copyright all rights reserved

do large capital inflows hinder competitiveness the dutch disease in ethiopia this article investigates whether large inflows of foreign aid and remittances have had a damaging impact on the ethiopian real exchange rate rer we improve the current empirical literature by i compiling a unique quarterly dataset to provide a larger sample size and enable the modelling of important intra year dynamics which should lead to better model specifications ii providing a new empirical approach unobserved components uc to test the dutch disease hypothesis and iii using several cointegration approaches to further test the robustness of our conclusions our results suggest that there are two main long run determinants of the rer in ethiopia trade openness is found to be correlated with rer depreciations while a positive shock to the terms of trade tends to appreciate the rer foreign aid is not found to have a statistically significant impact while there is only weak evidence that remittances are associated with rer appreciations the lack of empirical support for the dutc

on the simultaneity problem in the aid and growth debate this paper shows that foreign aid has a significant positive average effect on real per capita gross domestic product gdp growth if and only if the quantitatively large negative reverse causal effect of per capita gdp growth on foreign aid is adjusted for in the growth regression instrumental variables estimates show that a 1 percentage point increase in gdp per capita growth decreased foreign aid by over 4 adjusting for this quantitatively large negative reverse causal effect of economic growth on foreign aid shows that a 1 increase in foreign aid increased real per capita gdp growth by around 0 1 percentage points

25 years of aid allocation practice whither selectivity the 4p framework poverty population policy and proximity is introduced as a way of understanding a donor s aid allocation we use the two part model and examine the period 1982 2006 the results indicate that recent conclusions of increasing selectivity are misplaced for the seven major donors analyzed who together represent the majority of development aid indeed the effect of each of the commonly mentioned time trends selectivity the end of the cold war and the commencement of the global war on terror is much smaller than the role of donor heterogeneity which appears sizeable and entrenched

on aid growth and good policies this study provides a critical analysis of the growth regressions in burnside and dollar 2000 first we analyse the relationship between aid and government expenditure in a modified neo classical growth model one of the main results of the analysis is that while good policies spur growths they may at the same time reduce the effectiveness of foreign aid second we show that the econometric results in burnside and dollar emphasising the crucial role of interaction between aid and good policies in the growth process are fragile as they are extremely data dependent finally we demonstrate that the burnside and dollar data lend support to the idea that the association between aid and growth can be approximated by decreasing returns to aid this finding conforms well to regression results in other recent studies

aid to the services sector does it affect manufacturing exports this paper evaluates the impact of foreign aid to five service sectors transportation information and communications technologies energy banking financial services and business services on exports of downstream manufacturing sectors in developing countries to address the reverse causality between aid and exports the analysis relies on an original identification strategy that exploits i the variation of aid flows to service sectors and ii the variation of service intensities across industrial sectors and countries using input output data the authors find a positive effect of aid to services in general on downstream manufacturing exports of developing countries across regions and income level groups

aid effectiveness opening the black box this paper examines the causality chain linking aid flows to development outcomes it argues that many of the questions policymakers and economists would like data to answer simply cannot be answered due to the complexity and noise along links in the chain and the problem of attribution it then examines what is known about aid effectiveness along different links in the causality chain finally it turns to recent trends in the way aid is delivered and the new model that appears to be emerging

income effects and paradoxes in the theory of international trade every field in economics has its paradoxes phenomena which initially are thought to confound economic sense but ultimately come to be better understood the field of international trade can claim its fair share the examples of the metzler paradox wherein a tariff fails to provide protection or that of immerising growth wherein a country suffers a loss in welfare despite an improvement in production possibilities come easily to mind more recently a reexamination of the transfer problem in the context of many country trade or of tax distortions has revealed possibilities for donor countries to gain or transfer recipients to lose results which would be considered so paradoxical in standard treatments as to be ruled out by stability arguments behind each of the examples just cited lies a rational explanation in which income effects prove crucial in supporting a paradoxical outcome in some situations the potential for paradox rests on the possibility of income redistribution nationally or internationally when tastes differ among the various trading participants paradox becomes impossible if tastes at the margin are identical in other instances income redistribution is not the crucial mechanism and paradoxical outcomes may occur even if all traders possess the same taste patterns all cases share the property that paradoxes can arise only if the terms of trade are sufficiently disturbed substitution effects high values of which serve to dampen the required adjustment of prices to a market disturbance thus work to prevent paradoxical outcomes in the first section of this paper i focus on those issues for which income effects are associated with income redistribution especially the analysis of tariffs and transfers in markets that initially are free of taxes or other distortions in the second section i analyse an issue for which income redistribution is no longer the central ingredient the welfare consequences of growth a standard technique in game theory allows for a reinterpretation of the growth case to reveal the fundamental connection between a wide variety of standard two country results in the theory of international trade and the possibility of paradoxes in the three agent transfer problem i would therefore argue that the three agent transfer literature has wider applicability than is commonly perceived in the final section i analyse briefly the frequently encountered argument that some instances of paradoxical welfare loss can be avoided by optimal tariff policy i wish to thank isaias coelho for helpful conversations makoto yano for stimulating my interest in the transfer problem with many agents and j peter neary for comments on an earlier draft useful suggestions were also received at seminar presentations at the institute for international economic studies in stockholm and the london school of economics research support was provided by the national science foundation grants ses 78o6159 and ses 8309386 i the role of substitution effects in transfer paradoxes with more than two commodities and agents is discussed by de meza 1983

assessing foreign aid s long run contribution to growth in development this paper confirms recent evidence of a positive impact of aid on growth and widens the scope of evaluation to a range of outcomes including proximate sources of growth e g physical and human capital indicators of social welfare e g poverty and infant mortality and measures of economic transformation e g share of agriculture and industry in value added focusing on long run cumulative effects of aid in developing countries and taking due account of potential endogeneity a coherent and favorable pattern of results emerges aid has over the past forty years stimulated growth promoted structural change improved social indicators and reduced poverty

international redistribution of income summary how do international policies on aid trade and factor movements affect the international distribution of income we calculate the impact by world decile of the actual level of aid flows and the effect on income of merchandise trade restrictions by high income countries we find that aid s distributional impact is equality enhancing extremely small in terms of changes in inequality measures but of some importance for the lowest decile of the distribution we also find that some of this impact is counteracted by lost potential income in the lower deciles from merchandise trade barriers imposed by high income countries

the anarchy of numbers aid development and cross country empirics the recent literature contains many stories of how foreign aid affects economic growth aid raises growth in countries with good policies or with difficult economic environments or outside the tropics or on average but with diminishing returns the diversity of the results suggests that many are fragile seven important aid growth papers are tested for robustness using 14 minimally arbitrary tests deriving mainly from differences among the studies themselves this approach investigates the importance of potentially arbitrary specification choices while minimizing the arbitrariness in testing choices all of the results appear fragile especially to sample expansion

aid policies and growth comment in an extraordinarily influential paper craig burnside and david dollar 2000 p 847 find that aid has a positive impact on growth in developing countries with good fiscal monetary and trade policies but has little effect in the presence of poor policies this finding has enormous policy implications the burnside and dollar 2000 henceforth bd result provides a role and strategy for foreign aid if aid stimulates growth only in countries with good policies this suggests that 1 aid can promote economic growth and 2 it is crucial that foreign aid be distributed selectively to countries that have adopted sound policies international aid agencies public policy makers and the press quickly recognized the importance of the bd findings this paper reassesses the links between aid policy and growth using more data the bd data end in 1993 we reconstruct the bd database from original sources and thus 1 add additional countries and observations to the bd data set because new information has become available since they conducted their analyses and 2 extend the data through 1997 thus using the bd methodology we reexamine whether aid influences growth in the presence of good policies given our focus on retesting bd we do not summarize the vast pre bd literature on aid and growth we just note that there was a long and inconclusive literature that was hampered by limited data availability debates about the mechanisms through which aid would affect growth and disagreements over econometric specification see gustav f papanek 1972 robert cassen 1986 paul mosley et al 1987 peter boone 1994 1996 and henrik hansen and finn tarp s 2000 review since bd found that aid boosts growth in good policy environments there have been a number of other papers reacting to their results including paul collier and jan dehn 2001 carljohan dalgaard and hansen 2001 patrick guillaumont and lisa chauvet 2001 hansen and tarp 2001 robert lensink and howard white 2001 and collier and dollar 2002 these papers conduct useful variations and extensions some of which had already figured in the pre bd literature such as introducing additional control variables using nonlinear specifications etc some of these papers confirm the message that aid only works in a good policy environment while others drive out the aid policy interaction term with other variables this literature has the usual limitations of choosing a specification without clear guidance from theory which often means there are more plausible specifications than there are data points in the sample we differentiate our paper from these others by not deviating from the bd specification thus we do not test the robustness of the results to an unlimited number of variations but instead maintain the bd methodology this paper conducts a very simple robustness check by adding new data that were unavailable to bd thus we expand the sample used over their time period and extend the data from 1993 to 1997 easterly department of economics new york university 269 mercer street new york ny 10003 center for global development and national bureau of economic research e mail william easterly nyu edu levine department of finance carlson school of management university of minnesota 321 19th avenue south minneapolis mn 55455 and national bureau of economic research e mail rlevine csom umn edu roodman center for global development 1776 massachusetts avenue nw washington dc 20036 e mail droodman cgdev org we are grateful to craig burnside for supplying data and assisting in the reconstruction of previous results without holding him responsible in any way for the work in this paper thanks also to francis ng and prarthna dayal for generous assistance with updating the sachs warner openness variable and to three anonymous referees craig burnside and henrik hansen for helpful comments 1 see for instance the world bank 1994 2001 2002 the u k department for international development 2000 president george w bush s speech march 16 2002 the announcement by the white house on creating the millennium challenge corporation white house 2002 as well as a washington post editorial february 9 2002 a financial times column by alan beattie march 11 2002 and the economist march 16 2002

does aid for trade diversify the export structure of recipient countries the importance of aid for trade as a tool for facilitating trade economic growth and social development has received attention since the concept was introduced in 2005 while one of the main targets of aid for trade is export diversification reflecting the fact that the exports of many developing countries are concentrated in a small range of items there have not been many efforts to measure the effect of aid for trade on export structure this study therefore attempts to trace the relationship between aid for trade and 133 aid recipients export structure between 1996 and 2013 using the herfindahl hirschman index to measure the degree of export concentration the findings suggest that total aid for trade has reduced the concentration level in the short run in the long run on the other hand aid for trade has had no significant effect on export structure of recipient countries only aid for building productive capacity which is one of the three categories of aid for trade contributes to lower concentration yet this change is not caused by an increase in export diversity but by the redistribution of shares of existing products of a similar sophistication level

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

aid non traded goods and growth we examine the effects of foreign aid in a small recipient country with two traded goods one non traded good and two factors learning by doing and intersectoral knowledge spillovers contribute to endogenous growth we obtain two main results first a permanent increase in untied aid raises or lowers the growth rate if and only if the non traded good is more capital intensive or effective labour intensive than the operating traded good second a permanent increase in untied aid raises welfare if the non traded good is more capital intensive than the operating traded good otherwise it may raise or lower welfare jel classification f43 o41

aid dutch disease and manufacturing growth abstract we examine the effects of aid on the growth of manufacturing using a methodology that exploits the variation within countries and across manufacturing sectors and corrects for possible reverse causality we find that aid inflows have systematic adverse effects on a country s competitiveness as reflected in the lower relative growth rate of exportable industries we provide some evidence suggesting that the channel for these effects is the real exchange rate appreciation caused by aid inflows we conjecture that this may explain in part why it is hard to find robust evidence that foreign aid helps countries grow

transfers the terms of trade and capital accumulation in the context of a two sector overlapping generations model it is demonstrated that a steady state transfer paradox may arise under commodity trade with stability and without distortions or bystanders the existence of the paradox is due to the effect of the transfer on world capital accumulation which is shown to always i e for any ranking of factor intensities and savings rates improve the donor s terms of trade transfers may also improve steady state welfare for both donor and recipient and produce paradoxical welfare results along the transition path la litterature en statique du commerce international a conclu que en l absence de distorsions ou de tierces parties les mouvements des termes d echange induits par les transferts ne peuvent pas etre suffisamment importants quand il y a stabilite walrasienne pour engendrer le paradoxe du transfert on a tire la conclusion de modeles dynamiques a un secteur que le paradoxe du transfert est possible mais en comptant sur la mobilite internationale du capital et sur les mouvements dans le niveau mondial du taux d interet plutot que sur les prix et les marches des biens dans un modele dynamique a deux secteurs ou les generations se chevauchent ce qui permet des effets a la fois statiques et intertemporels dans les termes d echange le commerce des biens peut engendrer un paradoxe du transfert en regime permanent quand il y a stabilite walrasienne sans distorsions et tierces parties l existence du paradoxe est attribuable a l effet du transfert sur l accumulation du capital qui toujours pour tout ordre des intensites de facteur et des taux d epargne ameliore les termes d echange du donneur les transferts peuvent aussi ameliorer le bien etre du donneur et du recipiendaire en regime permanent et produire des resultats paradoxaux de bien etre dans le sentier de transition

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

aid instability as a measure of uncertainty and the positive impact of aid on growth this article contributes to the literature on aid and economic growth we posit that uncertainty measured as the instability of aid receipts will influence the relationship between aid and investment how recipient governments respond to aid and will capture the fact that some countries are especially vulnerable to shocks when we account for uncertainty which is negative and significant we find that aid has a significant positive effect on growth largely due to its effect on the volume of investment the finding that uncertainty of aid receipts reduces the effectiveness of aid is robust when the regression is estimated for the sub sample of african countries these findings hold although the effectiveness of aid appears weaker than for the full sample

aid proliferation and economic growth a cross country analysis summary we examine whether aid proliferation hinders economic growth by applying the standard aid growth regression to roodman s 2007 dataset with proper correction for possible biases arising from omitted variable and endogeneity problems specifically we include a donor concentration index to capture a low degree of donor proliferation and its interaction terms with aid variables as additional independent variables our empirical results show that the effect of aid concentration on economic growth is positive and favors the hypothesis that aid proliferation has a negative effect on the economic growth of recipient countries especially in africa

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

aid and growth what does the cross country evidence really show abstract we examine the effects of aid on growth in cross sectional and panel data after correcting for the possible bias that poorer or stronger growth may draw aid contributions to recipient co

immiserizing transfers from abroad abstract this paper shows that an international transfer payment may paradoxically immiserize the recipient country or increase the donor country s welfare even when world markets are stable despite the traditional view that such a paradox theoretically requires market instability to demonstrate this paradoxical possibility the paper extends the conventional trade theoretic analysis to admit exogenous distortions created by tax cum subsidies in domestic production or endogenous distortions due to additionality requirements imposed by the donor on the recipient this analysis of immiserizing transfers from abroad immediately suggests significant implications for important policy issues including the evaluation of real benefits from foreign aid

aid and growth regressions this paper examines the relationship between foreign aid and growth in real gdp per capita as it emerges from simple augmentations of popular cross country growth specifications it is shown that aid in all likelihood increases the growth rate and this result is not conditional on good policy there are however decreasing returns to aid and the estimated effectiveness of aid is highly sensitive to the choice of estimator and the set of control variables when investment and human capital are controlled for no positive effect of aid is found yet aid continues to impact on growth via investment we conclude by stressing the need for more theoretical work before this kind of cross country regressions are used for policy purposes

modelling choice and switching behaviour between scottish ski centres the paper identifies the need to model the skier s choice of centre and the basic ideas underlying discrete choice models and their estimation it then identifies data requirements and sources the final choice of specification and the estimated parameters of the resultant nested multinomial logit model the results indicate two quite distinct markets for day trippers snow cover cost and to a lesser extent the journey length were the critical factors for those staying overnight the key determinant in this market seems to be accommodation interestingly centres which for the day tripper are competitors become for the overnight customer complementary

more dollars than sense refining our knowledge of development finance using aiddata summary in this introductory essay to the special issue we introduce a new dataset of foreign assistance aiddata that covers more bilateral and multilateral donors and more types of aid than existing datasets while also improving project level information about the purposes and activities funded by aid we utilize that data to provide a brief overview of important trends in foreign aid contributors to this special issue draw on aiddata as well as other sources to analyze aid transparency new donors not previously described or analyzed aid allocation and aid effectiveness our recurring theme in this introductory essay is that aiddata and these initial academic projects refine rather than revolutionize our understanding of aid the database has added significant numbers of new projects dollar amounts donors and details about those projects though there is much more yet to add we worry that aid debates have been driven by too little information and that many claims are based on limited or very poor evidence rectifying these problems will not be instantaneous refining knowledge takes a lot of time and hard work the common feature of the papers in this special issue is their careful attention to nuance and detail in spite of what some recent authors have claimed aid is neither a simple solution nor a sufficient cause of most problems in developing countries its motivations distribution and effects are complex and shifting capturing this complexity requires detailed data careful thought and sophisticated methods that allow scholars to make conditional causal and descriptive inferences 2011 elsevier ltd all rights reserved

cross country evidence on the link between volatility and growth this paper presents empirical evidence against the standard dichotomy in macroeconomics that separates growth from the volatility of economic fluctuations in a sample of ninety two countries as well as a sample of oecd countries the authors find that countries with higher volatility have lower growth the addition of standard control variables strengthens the negative relationship the authors also find that government spending induced volatility is negatively associated with growth even after controlling for both time and country fixed effects copyright 1995 by american economic association

malthus to solow a unified growth theory is developed that accounts for the roughly constant living standards displayed by world economies prior to 1800 as well as the growing living standards exhibited by modern industrial economies our theory also explains the industrial revolution which is the transition from an era when per capita incomes are stagnant to one with sustained growth the authors use a standard growth model with several technologies the first denoted the malthus technology requires land labor and reproducible capital as inputs the second denoted the solow technology does not require land the authors show that in the early stages of development only the malthus technology is used and due to population growth living standards are stagnant despite technological progress eventually technological progress causes the solow technology to become profitable and both technologies are employed at this point living standards improve since population growth has less influence on per capita income growth in the limit the economy behaves like a standard solow growth model excerpt

aid and the supply side public investment export performance and dutch disease in low income countries contemporary policy debates on the macroeconomics of aid often concentrate on short run dutch disease effects ignoring the possible supply side impact of aid financed public expenditure in the simple model of aid and public expenditure presented here public infrastructure generates an inter temporal productivity spillover which may exhibit a sector specific bias the model also provides for a learning by doing externality through which total factor productivity in the tradable sector is an increasing function of past export volumes an extended computable version of this model is used to simulate the effect of a step increase in net aid flows the simulations show that beyond the short run when conventional demand side dutch disease effects are present the relationship between enhanced aid flows and real exchange rates output growth and welfare is less straightforward than simple models of aid suggest public infrastructure investment that generates a productivity bias in favor of non tradable production delivers the largest aggregate return to aid but at the cost of deterioration in the income distribution income gains accrue predominantly to skilled and unskilled urban households leaving the rural poor relatively worse off under plausible parameterizations of the model the rural poor may also be worse off in absolute terms