Foreign Aid Flashcards
foreign aid consists of an explicit transfer of real resources to less developed countries on concessional terms
Bhagwati (1970)
make extensive use of a modified Solow model to provide theoretical support for increasing the flow of foreign aid to sub-Saharan Africa (SSA).
Sachs et al (2004)
identifies four significant “traps” that ensnare the “bottom billion” of the world’s population, namely, “internal conflict traps,” “natural resource traps”. “landlocked by bad neighbour traps,” and “bad governance traps.”
Collier (2007)
uses malaria as an example of how foreign aid when properly designed and delivered, works, saving the lives of the poor and helping to promote economic growth
Sachs (2014)
that free nets “are often diverted to the black market, become out of stock in health clinics, or wind up being used as fishing nets or wedding veils
• nets in Zambia to people … found that 70 percent of the recipients didn’t use the nets
Easterly (2006)
argue that the allocation of aid has been dominated by strategic and political considerations.
Alesina and Dollar (2000)
• The empirical literature on aid effectiveness has yielded unclear and ambiguous results, has become a “black box”
Bourguignon and Sundberg (2007)
Aid is not associated with growth
Easterly (2006)
In absence of aid it would be a lot worse
Collier (2006)
show that there is no evidence that good governments receive more foreign aid than corrupt governments.
Alesina and Wedder (2002)
The whole issue that arises is that when the conditions for development are present, aid is not required, when they are not it is not useful
Deaton (2015)
we have 300 years of evidence on aid, it is not that complicated no one has escaped poverty by relying on foreign aid.
Moyo (2009)
Year of marshall plan
1948
model of growth where investment will lead to a “take off” into self-sustaining growth
Rostow (1956)
used the HD model to determine the allocation of foreign aid in underdeveloped countries to make the transition from stagnation to self-sustaining economic growth
Rosenstein-Rodan (1961)
- Chenery and Strout (1966)
s=g v = 16%, so A=s*-s
found an inverse relationship between aid and growth using South America data, arguing the Chenery and Strout model was based on the unrealistic assumption that foreign aid goes to saving as opposed to consumption
Griffin and Enos (1970)
Who was the first poverty trap used by?
Nelson (1956)
find little evidence supporting the existence of poverty traps in their extensive survey of the literature
Kraay and Raddatz (2007)
examines the effect of aid on a variety of macroeconomic variables and several development indicators, his study is one of the most cited proofs that there is no significant, positive influence of aid inflows on investment and growth in recipient countries
Boone (1996)
argue that aid is dangerous because it increases the power of the elite in the recipient governments, leading to corruption and hindering economic growth & development
Friedman (1958)
provides evidence that inflows of foreign aid are associated with increased corruption and rent seeking behaviour especially in countries where there are competing social groups
o Svensson (2000)
aid leads to moral hazard problem
Recipients lose incentive to produce and be innovative
E.g. Cuba became aid dependent from USSR, Venezuela and Brazil
Had no incentive to reform economy
Buchanan (1975)
the most cited aid and growth study in the literature
In a panel cross section study, they found foreign aid can play positive role in a country with good macroeconomic policies
A country has good policy environment if there is low inflation, low budget deficit, and no protectionism meaning trade is relatively open
o This study gained favour from aid regime supporters because it explains why aid has supported growth in several countries (Korea, Botswana, Indonesia, Mozambique and Uganda) while at the same time not influencing growth in others (Haiti, Liberia, Zaire and the Philippines).
Burnside and Dollar (2000)
