Aid Allocation Rules

Patrick Carter ()

Bristol Economics Discussion Papers from School of Economics, University of Bristol, UK

Abstract: This paper studies the aid allocation rule used by major development agencies, and investigates optimal allocations when recipients are neoclassical economies undergoing transition dynamics. When recipients face aid absorption constraints, allocations that favor poorer recipients are not always optimal, contrary to what is assumed in assessments of donor performance. The most quantitatively significant determinants of the optimal sensitivity to recipient characteristics are the generosity of the aid budget and the extent of absorption constraints. In neoclassical recipients aid can only accelerate growth where there is already growth, so the optimal rule places little weight on growth and optimality is largely a matter of balancing recipient need against absorption constraints.

Keywords: Foreign Aid; Allocation Rules; Economic Growth; Absorption Constraints (search for similar items in EconPapers)
JEL-codes: F35 O4 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2012-10
New Economics Papers: this item is included in nep-dev and nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Aid allocation rules (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:bri:uobdis:12/630

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