Cuesta, José; González, Mariano; Larrú, José María
December 2006
Revista de Economía Mundial;2006, Issue 15, p203
Academic Journal
Recent international calls for more effective foreign aid underscore the surprisingly little evidence on the redistributive impact of aid. Distribution in recipient countries is not even a qualifying criterion for donors when allocating aid. This paper addresses the fundamental question of whether current aid and economic growth trends will likely render substantive egalitarian benefits to the developing world. Using an ordered probit econometric model in a thirty developing country panel between 1995 and 1998, the paper finds that aid and economic growth affect recipient countries' inequality neither largely nor always in the same direction. Aid has typically lower impacts on the national distribution of incomes than economic growth. There are also important regional differences: the impacts of aid and economic growth are lowest in Latin America, the already most unequal region in the world. The new calls for more effective aid are absolutely justified: current strategies will unlikely improve inequality in the developing world.


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