Should a Poverty-Averse Donor Always Increase the Share of Governance-Improving Countries?

29 Pages Posted: 17 Sep 2018

Date Written: September 2018

Abstract

In this paper we revisit the problem of inter-country aid allocation with a single donor and two recipient countries. The donor has a given amount of aid to distribute and is sensitive to both needs and governance considerations. Conventional wisdom, as articulated in a well-known paper of Collier and Dollar (2002), holds that when a country improves its governance, it should receive more aid for a given level of poverty. We challenge this view by showing that this conclusion is not necessarily warranted. If the donor has strong enough aversion to poverty, the aid share of a country whose governance has improved will be reduced, thereby punishing instead of rewarding that country for its better institutional environment. Yet, the aid that reaches the poor will have risen. In this framework, the allocation rules actually used by important international organizations appear as implicitly based on a preference pattern that privileges governance over need considerations.

Keywords: aid allocation, governance, poverty aversion

JEL Classification: D02, D86, F35, O22

Suggested Citation

Bourguignon, Francois and Platteau, Jean‐Philippe, Should a Poverty-Averse Donor Always Increase the Share of Governance-Improving Countries? (September 2018). CEPR Discussion Paper No. DP13163, Available at SSRN: https://ssrn.com/abstract=3247235

Francois Bourguignon (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Jean‐Philippe Platteau

University of Namur ( email )

8 rempart de la vierge
Namur, 5000
Belgium

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
0
Abstract Views
111
PlumX Metrics