Foreign Aid and the Twenty-First Century

by Akhand, Hafiz A.; Gupta, Kanhaya L.

• ISBN13: 9781402071454
• ISBN10: 1402071450
• Format: Hardcover
• Copyright: 2002-06-01
• Publisher: Kluwer Academic Pub

Summary

Even after half a century of work and much criticism, the driving importance of foreign aid shows no sign of abating. Widespread and acute poverty still ravages many countries of the world, and the understanding of how aid affects the economies of the recipient countries is still far from perfect. These two factors alone warrant the examination offered in this book. The contents of this work try to bring together many strands of the literature, many of which are new and have a bearing on the subject of aid but which have as yet not found their way into the mainstream of the literature. This volume takes a broad survey and also provides a more specific treatment of elements of aid that have yet to be explored in the current literature. This book can serve as both a reference work as well as a research monograph and should be of use for students, as well as for researchers and policy makers.

Table of Contents

List of Figures	xiii
List of Tables	xvii
Acknowledgments	xxi
Introduction	1	(4)
Foreign Aid in the Twenty First Century	5	(10)
Aid Allocation and Donor Motives	15	(34)
On the Determinants of Aid	15	(3)
Brief review of empirical literature	18	(3)
Methodology	21	(3)
Data	24	(3)
Results: an overview	27	(4)
Non-Nordic countries	27	(2)
Nordic countries	29	(2)
Sensitivity analysis	31	(4)
Non-Nordic countries	31	(3)
Nordic countries	34	(1)
Conclusion	35	(14)
Aid, Policy and Growth: A Sensitivity Analysis	49	(22)
A selective literature review	50	(9)
Methodology	59	(5)
Data	64	(1)
Results: an overview	65	(4)
Sensitivity analysis	69	(1)
Conclusion	69	(2)
Aid, Policies and Growth: Implications of Simultaneity	71	(10)
Simultaneous equations model of aid, policies and growth	71	(3)
The model	72	(1)
Implications of simultaneity	73	(1)
The reduced form multipliers	74	(7)
Growth	75	(1)
Effects of foreign aid on growth	75	(1)
Effects of policy on growth	75	(1)
Effects of male literacy on growth	75	(1)
Effects of female literacy on growth	75	(1)
Investment	76	(1)
Effects of foreign aid on investment	76	(1)
Effects of policy on investment	76	(1)
Effects of male literacy on investment	76	(1)
Effects of female literacy on investment	77	(1)
Life expectancy	77	(1)
Effects of foreign aid on life expectancy	77	(1)
Effects of policy on life expectancy	77	(1)
Effects of male literacy on life expectancy	77	(1)
Effects of female literacy on life expectancy	77	(1)
Infant mortality	77	(1)
Effects of foreign aid on infant mortality	78	(1)
Effects of policy on infant mortality	78	(1)
Effects of male literacy on infant mortality	78	(1)
Effects of female literacy on infant mortality	78	(1)
Output per capita	78	(1)
Effects of foreign aid on output	78	(1)
Effects of policy on output	78	(1)
Effects of male literacy on output	78	(1)
Effects of female literacy on output	78	(1)
Consumption per capita	79	(1)
Effects of foreign aid on consumption	79	(1)
Effects of policy on consumption	79	(1)
Effects of male literacy on consumption	79	(1)
Effects of female literacy on consumption	79	(2)
Estimation Results	81	(26)
Introduction	81	(1)
Empirical structural form model	81	(2)
Empirical restricted reduced form model	83	(2)
Stability analysis	85	(3)
Estimation procedure	88	(5)
Structural form model	88	(2)
Reduced form model	90	(3)
Structural form estimates	93	(7)
Growth	93	(2)
Investment	95	(2)
Life expectancy	97	(2)
Infant mortality	99	(1)
Reduced form estimates	100	(5)
Growth	101	(1)
Investment	102	(1)
Life expectancy	103	(1)
Infant mortality	104	(1)
Conclusion	105	(2)
Effects of Exogenous Shocks: One-Period Analysis	107	(22)
The impact multipliers	107	(1)
Growth	108	(2)
Impact effects of aid	108	(1)
Impact effects of policy	108	(1)
Impact effects of male literacy rate	109	(1)
Impact effects of female literacy rate	110	(1)
Investment	110	(3)
Impact effects of aid	110	(1)
Impact effects of policy	111	(1)
Impact effects of male literacy rate	112	(1)
Impact effects of female literacy rate	112	(1)
Life expectancy	113	(2)
Impact effects of aid	113	(1)
Impact effects of policy	113	(1)
Impact effects of male literacy rate	114	(1)
Impact effects of female literacy rate	115	(1)
Infant mortality rate	115	(2)
Impact effects of aid	115	(1)
Impact effects of policy	116	(1)
Impact effects of male literacy rate	116	(1)
Impact effects of female literacy rate	116	(1)
Output per capita	117	(3)
Impact effects of aid	117	(1)
Impact effects of policy	118	(1)
Impact effects of male literacy rate	118	(1)
Impact effects of female literacy rate	119	(1)
Consumption	120	(9)
Impact effects of aid	120	(1)
Impact effects of policy	120	(1)
Impact effects of male literacy rate	120	(1)
Impact effects of female literacy rate	121	(8)
Implications of Aid And Policy Regime Shifts: Some Simulation Results	129	(34)
The simulation strategy	129	(4)
Growth rate	133	(13)
The base case	133	(1)
Aid-cold turkey and economic policy as in the base case	134	(2)
Aid as in the base case, but economic policy-big bang	136	(1)
Economy policy-gradual, but aid as in the base case	137	(1)
Aid-gradual elimination, but policy as in the base case	138	(3)
Aid-cold turkey and economic policy-big bang	141	(1)
Aid-cold turkey and economic policy-gradual	142	(2)
Aid-gradual and economic policy-big bang	144	(1)
Aid-gradual and economic policy-gradual	145	(1)
Consumption and investment behaviour	146	(4)
Output per capita	150	(13)
Summing Up and Lessons	163	(2)
Appendices	165	(28)
Data appendix I	165	(4)
Data appendix II	169	(4)
Simulation results on life expectancy	173	(10)
Simulation results on infant mortality	183	(10)
References	193	(4)
Index	197