Foreign aid Dalgaard

Question 1

Channels through Which Aid Affects Growth

Answer 1

• Physical capital (through solow model)
• Human resources: education, health, human capital
• productivity:

Question 2

Key findings

Answer 2

finds aid more effective in non-tropical regions due to structural differences like health and fertility.

increasing aid-to-GDP ratio by 1% raises long-run GDP per capita by 0.4%.

Question 3

Key points

Answer 3

Impact on Growth: Aid can positively impact economic growth, particularly through investments in physical and human capital, but the effects are generally modest and slow.

Structural conditions: the effects of aid is highly dependent on the country’s structural conditions like health, fertility, openness to international capital inflows.

Policy recommendation: aid should be invested in sectors where it can have significant long term effects, such as education, infrastructure, health,

Question 4

fertility effect on productivity

Answer 4

Reducing fertility can boost the productivity by lowerering the capital dilution.