The impact of multilateral and tied bilateral aid on the UK economy

Oliver Morrissey

Journal of International Development, 1990, vol. 2, issue 1, 60-76

Abstract: In line with their commitment to reduce public spending, the Conservative government under Thatcher cut the aid budget by some six per cent in real terms in their first five years in power, with the brunt of the cuts falling on bilateral aid. Business groups deplored this trend and argued that it be reversed because tied bilateral aid generated greater commercial benefits for the economy than multilateral aid, an argument which government ministers appeared to accept. We estimate and compare the impact of multilateral and tied bilateral aid on the UK economy in 1980 and 1985 using Input-Output impact analysis. The results suggest, quite strongly, that multilateral aid generates greater benefits both in volume terms and per equivalent amount of aid expenditure. We conclude that the case for the increased use of tied bilateral aid is weaker than commonly supposed.

Date: 1990
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jintdv:v:2:y:1990:i:1:p:60-76

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