Aid Growth And Poverty

The authors discuss the impact of foreign aid and tackle the question of why assessing the impact of aid is so difficult. The authors focus on peer-reviewed, cross-country studies published over the last decade and draw together some global-level assessments, considering the context and conditions under which aid might be said to ‘work’. Glennie and Sumner argue that the evidence in four areas shows signs of convergence that may have direct relevance for policy decisions on aid and for aid effectiveness discussions. These are as follows: Aid levels (meaning if aid is too low or too high); Domestic political institutions (including political stability and extent of decentralisation); Aid composition (including sectors, modalities, objectives and time horizons); and Aid volatility and fragmentation. Notably, this study finds that there is no consensus that the effectiveness of aid depends on orthodox economic policies.

June 1998 Aid spurs growth and poverty reduction only in a good policy environment so it should be targeted to countries that have improved their economic policy. That aid tends to be allocated relatively indiscriminately is one factor that undermines its potential impact. Spurring growth in the developing world is one stated objective of foreign aid. Another, more commonly cited, objective is reducing poverty. Generally poverty reduction and growth go hand in hand, but could aid mitigate poverty without measurably affecting growth? Burnside and Dollar examine how foreign aid affects infant mortality-an important social indicator that provides indirect evidence that the benefits of development are reaching people everywhere. They conclude that in developing countries with weak economic management-evidenced by poor property rights, high levels of corruption, closed trade regimes, and macroeconomic instability-there is no relationship between aid and the change in infant mortality. In distorted environments, development projects promoted by donors tend to fail. And aid resources are typically fungible, so the aid does not in fact finance these projects. Aid finances the whole public sector at the margin, which is why the quality of management is the key to effective assistance. A government that cannot put effective development policies in place is unlikely to oversee the effective use of foreign aid. On the other hand, there is a relationship between aid and a change in infant mortality when the recipient country has relatively good management. When management is good, additional aid worth 1 percent of GDP has a powerful effect, reducing infant mortality by 0.9 percent. In other words, aid spurs growth and improvements in social indicators only in a good policy environment. These findings strengthen the case for targeting foreign aid to countries that have improved their economic policy. But after controlling for per capita income and population, there has been almost no relationship between countries' economic policies and the amount of aid they get. The relatively indiscriminate allocation of assistance is one factor undermining the potential impact of aid. This paper-a product of Macroeconomics and Growth, Development Research Group-is part of a larger effort in the group to examine aid effectiveness. The study was funded by the Bank's Research Support Budget under the research project Economic Policies and the Effectiveness of Foreign Aid (RPO 681-70). The authors may be contacted at [email protected] or [email protected].

Sumner and Mallett review the literature on aid in light of shifts in the aid system and the increasing concentration of the world's poor in middle-income countries. As a consequence, they propose a series of practical, policy relevant options for future development cooperation, with the aim of provoking discussion and informing policy.

Trade for Growth and Poverty Reduction: How Aid for Trade Can Help explains how Aid for Trade can foster economic growth and reduce poverty, and why it is an important instrument for a development strategy that actively supports poverty alleviation.

This book assesses the prospects of official development assistance (ODA) for poverty reduction. It analyzes the entire value chain of ODA, including provision, allocation and utilization. Within each of these components, coverage examines scope and limits of aid. The horizontal interactions between donors and recipients as well as the vertical connections to local and region-specific conditions represent the heart of this book's approach.

Takes a look at the issue od aid effectiveness from a macro perspective.

Debunking the current model of international aid promoted by both Hollywood celebrities and policy makers, Moyo offers a bold new road map for financing development of the world's poorest countries.

Foreign aid is one of the few topics in the development discourse with such an uninterrupted, yet volatile history in terms of interest and attention from academics, policymakers, and practitioners alike. Does aid work in promoting growth and reducing poverty in the developing world? Will a new 'big push' approach accelerate progress towards the Millennium Development Goals or will another opportunity be missed? Can the lessons of almost half a century of aid giving be learnt? These are truly important questions in view of the emerging new landscape in foreign aid and recent developments related to the global financial crisis, which are expected to have far reaching implications for both donors and recipients engaged in this area. Against this shifting aid landscape, there is a pressing need to evaluate progress to date and shed new light on emerging issues and agendas. This volume brings together leading aid experts to review the progress achieved so far, identify the challenges ahead, and discuss the emerging policy agenda in foreign aid. A central conclusion of this important and timely volume is that, since development aid remains crucial for many developing countries, a huge effort is needed from both donors and aid recipients to overcome the inefficiencies and make aid work better for poor people. After all, as global citizens, we have a moral obligation to do the best we can to lift people out of poverty in the developing world. The findings of this book will be of considerable interest to professionals and policymakers engaged in policy reforms in foreign aid, and provide an essential one-stop reference for students of development, international finance, and economics.

Over the past twenty years more citizens in China and India have raised themselves out of poverty than anywhere else at any time in history. They accomplished this through the local business sector the leading source of prosperity for all rich countries. In most of Africa and other poor regions the business sector is weak, but foreign aid continues to fund government and NGOs. Switching aid to the local business sector in order to cultivate a middle class is the oldest, surest, and only way to eliminate poverty in poor countries. A bold fusion of ethics and smart business, The Aid Trap shows how the same energy, goodwill, and money that we devote to charity can help local business thrive. R. Glenn Hubbard and William Duggan, two leading scholars in business and finance, demonstrate that by diverting a major share of charitable aid into the local business sector of poor countries, citizens can take the lead in the growth of their own economies. Although the aid system supports noble goals, a local well-digging company cannot compete with a foreign charity that digs wells for free. By investing in that local company a sustainable system of development can take root.