Aid effectiveness, Governance and Public Investment

KASUGA Hidefumi and MORITA Yuichi

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: To analyze how to make aid effective, we develop a growth model in which aid finances infrastructure investment and pro-poor spending. We assume that recipient countries are aid dependent in the early phase of development but finally become independent. In the model, donors can accelerate the independence of a recipient from aid by investing in infrastructure. We demonstrate that even a small increase in aid can improve aid effectiveness and that aid effectiveness depends more on growth rates than on the efficiency of government. This paper also evaluates Japan's aid, which has strength in economic infrastructure.

Date: 2009-11
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Persistent link: http://EconPapers.repec.org/RePEc:eti:dpaper:09055

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