can foreign aid reduce income inequality and poverty this paper s goal is to examine the effect of foreign aid on income inequality and poverty reduction for the period 1971 2002 since simple cross country regressions cannot be taken as true time series findings we focus on dynamic panel data techniques which allow accounting for potential simultaneity and heterogeneity problems we find some weak evidence that foreign aid is conducive to the improvement of the distribution of income when the quality of institutions is taken into account however this result is not robust this finding is consistent with recent empirical research on aid ineffectiveness in achieving economic growth or promoting democratic institutions

do elites benefit from democracy and foreign aid in developing countries abstract a popular argument for the absence of any beneficial effects of foreign aid is that it is skimmed by political elites in recipient countries however studies also suggest that aid may be more effective in relatively democratic developing countries by exploring data on income quintiles derived from the world income inequality database for 88 developing countries a set of results indicate that foreign aid and democracy in conjunction are associated with a higher share of income held by the upper quintile it thus appears that foreign aid contrary to popular beliefs leads to a more skewed income distribution in democratic developing countries while the effects are negligible in autocratic countries the paper closes with a discussion of potential mechanisms generating this perverse effect

inequality and the impact of growth on poverty comparative evidence for sub saharan africa abstract this study explores the extent to which inequality affects the impact of income growth on the rates of poverty changes in sub saharan africa ssa compared to non ssa based on an unbalanced panel of 86 countries over 1977 2004 for all three measures of poverty headcount gap and squared gap the impact of gdp growth on poverty reduction is a decreasing function of initial inequality the impacts are similar in direction for ssa and non ssa so that within both regions there are considerable disparities in the responsiveness of poverty to income growth depending on inequality nevertheless the income growth elasticity is substantially less for ssa implying relatively small poverty reduction response to growth

fertility volatility and growth abstract empirically growth rates are negatively correlated with birth rates they are also correlated with production risk we argue that these stylized facts are related and arise jointly from the decision of how many children to have in a risky environment

reinventing foreign aid for inclusive and sustainable development kuznets piketty and the great policy reversal this survey essay reviews over 200 papers in arguing that in order to achieve sustainable and inclusive development foreign aid should not orient developing countries towards industrialisation in the perspective of kuznets but in the view of piketty abandoning the former s view that inequality will fall with progress in industrialisation and placing more emphasis on inequality in foreign aid policy will lead to more sustainable development outcomes inter alia mitigate short term poverty address concerns of burgeoning population growth train recipient governments on inclusive development fight corruption and mismanagement and avoid the shortfalls of celebrated kuznets conjectures we discuss how the essay addresses post 2015 development challenges and provide foreign aid policy instruments with which discussed objectives can be achieved in summary the essay provides useful policy measures to avoid past pitfalls output may be growing and yet the mass of the people may be becoming poorer lewis 1955 lewis led all developing countries to water proverbially speaking some african countries have so far chosen not to drink amavilah 2014 piketty 2014 has led all developing countries to the stream again and a challenging policy syndrome of our time is how foreign aid can help them to drink

foreign aid and market liberalizing reform market oriented economic policies reflected in limited economic activity by government protection of private property rights sound monetary policy outward orientation regarding trade and efficient tax and regulatory policy have been strongly linked to faster rates of economic growth foreign aid is often provided in the belief that it encourages liberalizing reforms in these areas this paper analyzes the impact of aid on market liberalizing policy reform correcting for the possible endogeneity of aid results indicate that higher aid slowed reform over the 1980 2000 period as measured by a broad index of policies disaggregating policy into five areas aid is significantly linked to slower reform in some policy areas but not in others disaggregating by decade aid s adverse impact on policy reform is much more pronounced for the 1980s than for the 1990s

economic growth inequality and poverty estimating the growth elasticity of poverty summary this paper uses a new data set of 126 intervals from 60 developing countries to analyze the growth elasticity of poverty that is how much does poverty decline in percentage terms with a given percentage rise in economic growth the data set is both broader in coverage and more selective in terms of quality controls than those used in the past the study finds that while economic growth does reduce poverty in developing countries the rate of poverty reduction depends very much on how economic growth is defined controlling for changes in income inequality when economic growth is measured by changes in survey mean income consumption the growth elasticity of poverty excluding eastern europe and central asia is 2 79 that is a 10 increase in the survey mean will reduce poverty 1 00 person day by 27 9 but when growth is measured by changes in gdp per capita the growth elasticity of poverty is a statistically insignificant 2 27 which is lower than has previously been estimated

does foreign aid promote the expansion of government building on the literature on public finance i seek to advance our understanding of variations in government size by exploring the impact of official development assistance on fiscal policy i hypothesize that foreign aid operates in accordance with the flypaper effect systematically generating incentives and opportunities for the expansion of government spending results from a time series cross sectional regression analysis of growth in government spending over the 1970 99 time period are consistent with the hypothesis for middle and lower income nations aid represents an important determinant of government expansion looking at the tax and revenue side of the equation however reveals a more perverse pattern of response aid promotes not only increased spending but also reduced revenue generation the results have important implications from both a theoretical and policy perspective inter alia they point to the potentially self defeating nature of efforts to promote market oriented programs of state retrenchment via development assistance as well as to the importance of incorporating international transfers into future research on government spending

the return of patrimonial capitalism a review of thomas piketty s capital in the twenty first century capital in the twenty first century by thomas piketty provides a unified theory of the functioning of the capitalist economy by linking theories of economic growth and functional and personal income distributions it argues based on the long run historical data series that the forces of economic divergence including rising income inequality tend to dominate in capitalism it regards the twentieth century as an exception to this rule and proposes policies that would make capitalism sustainable in the twenty first century jel d31 d33 e25 n10 n30 p16

the ghost of financing gap testing the growth model used in the international financial institutions abstract the harrod domar growth model supposedly died long ago still today economists in the international financial institutions ifis apply the harrod domar model to calculate short run investment requirements for a target growth rate they then calculate a financing gap between the required investment and available resources and often fill the financing gap with foreign aid the financing gap model has two simple predictions 1 aid will go into investment one for one and 2 there will be a fixed linear relationship between growth and investment in the short run the data soundly reject these two predictions of the financing gap model

foreign aid poverty reduction and democracy eradication of poverty is the most pervasive goal of donors foreign aid programmes as a result there has been much research on the degree of correlation between aid and poverty reduction however this work to date has shed little light on the direction of causation between the two variables using the method of granger causality and conditioning aid and poverty on the state of democracy in developing countries this study asks whether aid flows impact poverty whether poverty influences aid flows or whether causality proceeds in both directions simultaneously while the results identify no causal relationships in some of the sub samples they point to the existence of a multitude of relationships across others

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

eight questions about corruption this paper will discuss eight frequently asked questions about public corruption 1 what is corruption 2 which countries are the most corrupt 3 what are the common characteristics of countries with high corruption 4 what is the magnitude of corruption 5 do higher wages for bureaucrats reduce corruption 6 can competition reduce corruption 7 why have there been so few recent successful attempts to fight corruption 8 does corruption adversely affect growth

aid dependence and the quality of governance cross country empirical tests aid dependence can potentially undermine the quality of governance and public sector institutions by weakening accountability encouraging rent seeking and corruption fomenting conflict over control of aid funds siphoning off scarce talent from the bureaucracy and alleviating pressures to reform inefficient policies and institutions analyses of cross country data in this paper provide evidence that higher aid levels erode the quality of governance as measured by indices of bureaucratic quality corruption and the rule of law these findings support the need for donors to develop less costly and less intrusive ways of disseminating state of the art knowledge on public sector reform in developing countries

the african growth miracle measures of real consumption based on the ownership of durable goods the quality of housing the health and mortality of children the education of youths and the allocation of female time in the household indicate that sub saharan living standards have for the past two decades been growing about 3 4 3 7 percent per year that is three and a half to four times the rate indicated in international data sets

explaining global patterns of international aid for linked biodiversity conservation and development summary there is little systematic knowledge about the nature extent and trends of international aid for projects that link biodiversity conservation and development goals this study uses a new dataset to analyze spatial and temporal patterns of such aid globally over the past three decades results reveal significant donor selectivity in aid allocation though linked conservation and development aid comprised more than two thirds of all biodiversity related assistance biodiversity aid generally was directed to biodiversity rich well governed countries but countries able to exert greater political leverage secured more linked aid than aid targeted to conservation without a stated development objective

the aid effectiveness literature the sad results of 40 years of research abstract the aid effectiveness literature ael consists of empirical macroeconomic estimates of the effects of development aid by the end of 2004 it comprised 97 econometric studies of three families of related effects each family has been analyzed in a separate meta analysis the ael is an ideal subject for meta analysis as it uses only a few formally similar models to estimate the same underlying effects it is also an area with strong beliefs often generated by altruism when this whole literature is examined a clear pattern emerges after 40 years of development aid the preponderance of the evidence indicates that aid has not been effective we show that the distribution of results is significantly asymmetric reflecting the reluctance of the research community to publish negative results the dutch disease effect on exchange rates provides a plausible explanation for the observed aid ineffectiveness

not by growth alone the role of the distribution of income in regional diversity in poverty reduction this study examines the role of the distribution of income in determining the responsiveness of poverty to income growth and changes in income inequality using panel data of 58 developing countries for the period 1980 1998 we show that the large cross regional variation in the capacity of income growth to reduce poverty i e the income elasticity is largely explained by differences in the initial distribution of income and present region and time specific estimates of the income and gini elasticities of poverty we find that the income elasticity of poverty in the mid 1990s equals 1 31 on average and ranges from 0 71 for sub saharan africa to 2 27 for the middle east and north africa and that the gini elasticity of poverty equals 0 80 on average and ranges from 0 01 in south asia to 1 73 in latin america furthermore we show that while differing income growth rates account for most of the regional diversity in poverty trends the additional impact of differences across regions in rates of inequality change and income and inequality elasticities of poverty is almost always significant and far too large to be ignored most notably so in eastern europe and central asia

charitable giving in the german welfare state fiscal incentives and crowding out there are two ways that government activities influence private charitable giving 1 government spending on the provision of public goods may cause crowding out of private charitable contributions and 2 tax incentives may boost private charitable giving from a sample of german income tax returns we estimate the elasticity of charitable giving relative to tax incentives income and government spending using censored quantile regression analysis we derive results for different points of the underlying distribution of charitable giving evaluating overall treasury efficiency the tax deductibility of charitable donations fosters enough private giving to offset foregone tax revenues

partners in giving the crowding in effects of uk government grants abstract this study examines the determinants of voluntary donations to uk charities using empirical specifications that combine error component and simultaneous equations methods in a series of tests we identify the one way fixed effects endogenous representation for government grants as the best empirical model when this endogeneity is taken into account government grants cause significant crowding in for the full sample and the two largest cohorts price coefficients are negative and fund raising coefficients are positive religion charities are net revenue maximizers whereas other charity cohorts fund raise short of net revenue maximization

recalculating co2 emissions from the perspective of value added trade an input output analysis of china s trade data abstract using traditional trade statistics to calculate co 2 emissions embodied in international trade results in significant miscalculations and a deeper divide between countries the aim of this research is to provide a reasonable estimate of carbon emissions to help policymakers in each country address their actual share of responsibility this study employs the world input output database and the gross export decomposition methodology to recount the co 2 emissions embodied in china s international trade from the perspective of value added trade the result shows that reliance on traditional statistics caused a significant overestimation of china s imports and exports us 398 77 billion and us 504 46 billion for china s imports and exports respectively our findings suggest that 177 24 million tons of carbon emissions embodied in imports and 907 636 million tons of carbon emission embodied in exports were over calculated the result obtained with traditional calculation methods has artificially increased the responsibility share of china in the global emissions reduction we also compare the co 2 emission coefficients of china with those of other countries our findings suggest that the high emission coefficients of most chinese industrial sectors determine the carbon emissions embodied in china s exports to be higher than in its imports

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

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

population growth and human capital investments theory and evidence this paper presents evidence from empirical studies that test hypotheses derived from models of household behavior pertaining to the interrelationships among population growth human capital and economic development these studies have exploited quasi natural experiments embodied in the cross area variability in the wage rates of children in a number of low income countries the intercouple variation in the biological propensity to conceive and the geographically selective introduction of new high yielding seed varieties in india in the period 1961 71 the different varieties of evidence support the hypotheses that alterations in the returns to human capital associated with exogenous technical change lead simultaneously to increases in human capital investments and to reductions in fertility and that the costliness of fertility control is a significant but modest factor in inhibiting human capital investments

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

why don t we see poverty convergence average living standards are converging among developing countries and faster growing economies see more progress against poverty yet we do not find poverty convergence countries starting with higher poverty rates do not see higher proportionate rates of poverty reduction the paper tries to explain why analysis of a new dataset suggests that at given mean consumption high initial poverty has an adverse effect on consumption growth and also makes growth less poverty reducing thus for many poor countries the growth advantage of starting out with a low mean is lost due to a high incidence of poverty jel d63 i31 i32 o15

can high inequality developing countries escape absolute poverty do the poor face the same prospects for escaping poverty in high inequality developing countries as in low inequality countries is it possible for inequality to be so great as to stifle prospects of reducing absolute poverty even when other initial conditions and policies are favorable to growth household survey data for developing countries suggest that initial distribution does affect how much the poor share in rising average incomes higher initial inequality tends to reduce growth s impact on absolute poverty by the same token higher inequality diminishes the adverse impact on the poor of general economic contraction combining this evidence with that from recent investigations of inequality s effect on growth the author finds that if inequality is high enough countries that would have very good growth prospects at low levels of inequality may see little or no overall growth and little progress in reducing poverty or even a worsening on both counts the data the author uses suggest that such cases do occur the precision with which key parameters have been estimated makes it difficult to say with confidence how common such cases are but they appear to be in the minority what appear to be the best available estimates suggest that about one fifth of the spells between surveys he analyzed were cases in which poverty was rising yet positive growth in the mean and hence falling poverty is predicted at zero inequality inequality can be high enough to result in rising poverty despite good underlying growth prospects