Dynamic aid allocation

Patrick Carter (), Fabien Postel-Vinay and Jonathan Temple

Journal of International Economics, 2015, vol. 95, issue 2, 291-304

Abstract: This paper introduces a framework for studying the optimal dynamic allocation of foreign aid among multiple recipients. We pose the problem as one of weighted global welfare maximization. A donor in the North chooses an optimal path for international transfers, anticipating that consumption and investment decisions will be made by optimizing households in the South, and accounting for limits in the extent to which recipients can effectively absorb aid. We present quantitative results on optimal aid policy by applying our approach to a neoclassical growth model, where the scope for aid-funded growth is determined by the recipients' distance from steady-state.

Keywords: Foreign aid; Aid allocation; Global redistribution (search for similar items in EconPapers)
JEL-codes: F35 O41 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:95:y:2015:i:2:p:291-304

DOI: 10.1016/j.jinteco.2014.11.005

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