A Primer on Foreign Aid

24 Pages Posted: 29 Apr 2007

Date Written: July 2006

Abstract

Controversies about aid effectiveness go back decades. Some experts charge that aid has enlarged government bureaucracies, perpetuated bad governments, enriched the elite in poor countries, or just been wasted. Others argue that although aid has sometimes failed, it has supported poverty reduction and growth in some countries and prevented worse performance in others. This new working paper by senior fellow Steve Radelet explores trends in aid, the motivations for aid, its impacts, and debates about reforming aid. It begins by examining aid magnitudes and who gives and receives aid. It discusses the multiple motivations and objectives of aid, some of which conflict with each other. It then explores the empirical evidence on the relationship between aid and growth, which is divided between research that finds no relationship and research that finds a positive relationship (at least under certain circumstances). It also examines some of the key challenges in making aid more effective, including the principal-agent problem and the related issue of conditionality, and concludes by examining some of the main proposals for improving aid effectiveness.

Keywords: Foreign aid, poverty reduction

JEL Classification: O19, O00, F00

Suggested Citation

Radelet, Steven, A Primer on Foreign Aid (July 2006). Center for Global Development Working Paper No. 92, Available at SSRN: https://ssrn.com/abstract=983122 or http://dx.doi.org/10.2139/ssrn.983122

Steven Radelet (Contact Author)

Center for Global Development ( email )

2055 L St. NW
5th floor
Washington, DC 20036
United States

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