Dynamic aid allocation

Patrick Carter, Fabien Postel-Vinay and Jonathan Temple
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Patrick Carter: ODI - Overseas Development Institute - Overseas Development Institute

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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)
Date: 2015-03
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03392988v1
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Citations: View citations in EconPapers (3)

Published in Journal of International Economics, 2015, 95 (2), pp.291 - 304. ⟨10.1016/j.jinteco.2014.11.005⟩

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Journal Article: Dynamic aid allocation (2015)
Working Paper: Dynamic aid allocation (2015)
Working Paper: Dynamic Aid Allocation (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-03392988

DOI: 10.1016/j.jinteco.2014.11.005

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