Foreign Aid Policy and Sources of Poverty: A Quantitative Framework

Alex Mourmouras and Peter Rangazas

No 2006/014, IMF Working Papers from International Monetary Fund

Abstract: The econometric literature has been unable to establish a robust association between foreign aid and growth and poverty reduction. In this paper we argue that aid effectiveness must be assessed using methods that go beyond cross-country regressions. We calibrate a dynamic general equilibrium model that is capable of generating large income gaps between rich and poor countries. The model quantifies three sources of poverty: (i) lack of access to international capital, (ii) low schooling and high fertility (a poverty trap), and (iii) antigrowth domestic fiscal policy. We analyze policies designed to address each source of poverty and estimate and compare the aid cost of implementing the different policies. The policies differ dramatically in the extent and timing of their growth effects, and in the aid cost of their implementation.

Keywords: WP; open economy; poverty trap; foreign aid policy; growth; poverty; schooling; fertility; capital mobility; worker productivity; fiscal policy difference; productivity variable; physical capital difference; B. worker productivity difference; worker productivity difference; physical capital accumulation; productivity gap; anti-growth fiscal policy; spreads saving; fiscal policy reform; saving flow; Capital productivity; Productivity; Africa; Global (search for similar items in EconPapers)
Pages: 32
Date: 2006-01-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=18781 (application/pdf)

Related works:
Journal Article: Foreign Aid Policy and Sources of Poverty: A Quantitative Framework (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2006/014

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().