Equal opportunity and poverty reduction: how should aid be allocated?

Patrick Guillaumont, Phu Nguyen‐van, Thi Kim Cuong Pham and Laurent Wagner
Additional contact information
Patrick Guillaumont: FERDI - Fondation pour les Etudes et Recherches sur le Développement International
Phu Nguyen‐van: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique
Thi Kim Cuong Pham: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper analyses a model of aid allocation that aims to equalize the opportunity between recipient countries to reach a common poverty reduction goal. We propose a fair and efficient aid allocation based on a multi-criteria principle. The model considers structural handicaps in recipient countries in terms of lack of human capital and economic vulnerability, their initial poverty, and the natural gap between the growth rate required to reach a development goal and the observed one. We show that our proposed aid allocation favors poor and vulnerable countries with our multi-criteria principle. It substantially differs from the observed allocation. Analyses also shed light on the impact of the donors' aversion to the low natural growth gap in recipient countries on the optimal aid allocation and the marginal efficiency of aid.

Keywords: Development Aid; Efficiency; Equity; Growth Deviation; Poverty Reduction (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-des and nep-fdg
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Published in Review of Development Economics, 2023, 27 (1), pp.550-607. ⟨10.1111/rode.12939⟩

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Journal Article: Equal opportunity and poverty reduction: How should aid be allocated? (2023)
Working Paper: Equal opportunity and poverty reduction: how should aid be allocated? (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03928480

DOI: 10.1111/rode.12939

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