Looking ahead optimally in allocating aid

Adrian Wood

QEH Working Papers from Queen Elizabeth House, University of Oxford

Abstract: The Collier-Dollar approach to aid allocation has been less than fully embraced by donors – even those focused on poverty reduction – and has come into conflict with a different approach based on the Millennium Development Goals. These two approaches are shown to be special cases of a more general model of optimal aid allocation, in which donors care about future as well as current poverty. The model is illustratively applied to data for developing regions. Adding a poverty decline adjustment to the allocation formulae now used by aid agencies would make these formulae more efficient and more acceptable.

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Journal Article: Looking Ahead Optimally in Allocating Aid (2008)
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