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Virtuous Circles and the Case for Aid

Patrick Carter (paddycarter@gmail.com) and Jonathan Temple

Bristol Economics Discussion Papers from School of Economics, University of Bristol, UK

Abstract: It is sometimes argued that foreign aid leads to a virtuous circle in which growth becomes self-reinforcing. We study two versions of this argument, using a modified neoclassical growth model in which the effects of parameter changes and capital accumulation are amplified. Simulations are used to quantify the welfare benefits from aid transfers. We find that, contrary to expectations, amplification makes only a modest difference to the welfare benefits from aid. This is true even when aid allows a faster exit from a vicious circle or poverty trap.

Keywords: Foreign aid; amplification effects; virtuous circles (search for similar items in EconPapers)
JEL-codes: F35 O40 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2014-05, Revised 2015-10-12
References: Add references at CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Virtuous Circles and the Case for Aid (2017) Downloads
Working Paper: Virtuous Circles and the Case for Aid (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bri:uobdis:14/636

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