Scaling-Up Foreign Aid: Will the Big Push Work?

Abstract

International donors are substantially scaling-up aid programmes. At the same time, there are widespread reservations over how much aid recipient countries can use effectively. Such concerns are supported by the aid effectiveness literature which finds that there are limits to the amounts of aid recipients can efficiently absorb. This article demonstrates that a big push in foreign aid will not lead to diminishing returns as long as donors get the inter-country allocation of aid right. This is true even if donors provide aid at levels equal to the well-known target of 0.7 per cent of their gross national income.