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Aid Effectiveness for Poverty Reduction: Lessons from Cross‑country Analyses, with a Special Focus on Vulnerable Countries

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Listed:
  • Patrick Guillaumont
  • Laurent Wagner
Abstract
Cross?country econometric studies of aid effectiveness are numerous and often criticized. Relying on results of those which seem the most relevant and robust, this paper argues that aid is leading to poverty reduction, in particular in vulnerable countries. It examines the main methodological challenges faced by these studies, related to the definition aid, to its endogeneity, to the heterogeneity of the country features conditioning its effectiveness, to its variable returns, to the time dynamics of this effectiveness. Three main channels by which aid may influence the poverty levels are considered: the economic growth, the public social expenditures, and the macroeconomic stabilizing impact, interrelated with the two other channels. The stabilizing impact of aid has a major influence on poverty reduction, which cannot be evidenced without cross country analyses. JEL Classification: F35, O11, O40, C21, I3.

Suggested Citation

  • Patrick Guillaumont & Laurent Wagner, 2014. "Aid Effectiveness for Poverty Reduction: Lessons from Cross‑country Analyses, with a Special Focus on Vulnerable Countries," Revue d’économie du développement, De Boeck Université, vol. 22(HS01), pages 217-261.
    • Handle: RePEc:cai:edddbu:edd_hs01_0217
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    10. Le Van, Cuong & Pham, Ngoc-Sang & Pham, Thi Kim Cuong, 2023. "Effects of development aid (grants and loans) on the economic dynamics of the recipient country," Mathematical Social Sciences, Elsevier, vol. 125(C), pages 101-112.
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    18. Chapel, Capucine, 2022. "Impact of official development assistance projects for renewable energy on electrification in sub-Saharan Africa," World Development, Elsevier, vol. 152(C).
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    8. Edmore MAHEMBE & Nicholas M. ODHIAMBO, 2017. "On The Link Between Foreign Aid And Poverty Reduction In Developing Countries," Revista Galega de Economía, University of Santiago de Compostela. Faculty of Economics and Business., vol. 26(2), pages 113-128.
    9. Lukasz Marc, 2012. "New Evidence on Fungibility at the Aggregate Level," Tinbergen Institute Discussion Papers 12-083/2, Tinbergen Institute.
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    18. Katarina Juselius & Niels Framroze Møller & Finn Tarp, 2014. "The Long-Run Impact of Foreign Aid in 36 African Countries: Insights from Multivariate Time Series Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 76(2), pages 153-184, April.
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    More about this item

    Keywords

    aid; growth; poverty; vulnerability; instability; stabilizing impact; thresholds; public expenditures; education; health; budget support; conditionality; cross-sectional studies;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

    Statistics

    Access and download statistics

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