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Efficient and fair allocation of aid

Author

Listed:
  • Patrick Guillaumont
  • Phu Nguyen-Van
  • Thi Kim Cuong Pham
  • Laurent Wagner

Abstract

This paper proposes a model of aid allocating which aims to equalize the opportunity between recipient countries to reduce the poverty, in particular the millennium development goal of reducing the poverty by half. The model also takes into account the natural deficit which is defined by the gap between the growth rate required to reach this millennium goal and the actual growth rate observed in the recipient country. The resulting optimal aid allocation is computed using the estimation of the growth equation. The latter takes into account effects of aid and structural handicaps which are represented by the economic vulnerability index and lack of human capital. We also perform a simulation study which show a substantial difference between the aid allocation obtained with the Collier-Dollar (2002) criterion and that obtained with our model.

Suggested Citation

  • Patrick Guillaumont & Phu Nguyen-Van & Thi Kim Cuong Pham & Laurent Wagner, 2015. "Efficient and fair allocation of aid," Working Papers of BETA 2015-10, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    • Handle: RePEc:ulp:sbbeta:2015-10
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    References listed on IDEAS

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    Cited by:

    1. Thi Kim Cuong PHAM & Ngoc-Sang PHAM, 2017. "Economic growth and escaping the poverty trap: how does development aid work?," Working Papers P197, FERDI.

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    More about this item

    Keywords

    Efficiency; equity; development aid; growth deficit; vulnerability.;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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