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2022 | OriginalPaper | Chapter

Allocation and Effectiveness of Foreign Aid: An Overview

Authors : Ngoc-Sang Pham, Thi Kim Cuong Pham

Published in: International Trade, Economic Development, and the Vietnamese Economy

Publisher: Springer Nature Singapore

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Abstract

This study investigates the nexus between foreign aid and economic outcomes in recipient countries and examines the aid rules to promote its effectiveness. Analyses aim to provide an overview of the two important points in aid literature: aid effectiveness and aid allocation. First, we focus on internal and external factors that can explain why foreign aid is effective in some recipient countries but ineffective in others. Both theoretical and empirical analyses are explored. Second, our work discusses the principal elements influencing aid rules often qualified as suboptimal. Finally, we analyze the criteria and conditions for an optimal allocation of aid, taking into account recipient characteristics and donors’ preferences.

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Footnotes
2
For contracting with foreign aid in a static model, see Azam and Laffont (2003). See Bourguignon and Plateau (2017) for an overview of the theoretical literature that deals with the problem of governance in donor–recipient relationships by using the contract theory.
 
3
This means that recipient countries divert aid flows to fund items that the donors did not wish to support.
 
4
See Morissey (2015) for further details on this issue.
 
5
The World Bank book Assessing Aid presenting the aid policy uses the same policy indicator recommended by Burnside and Dollar.
 
6
Further details of the CPIA can be found in World Bank (2010) and Collier and Dollar (2001, 2002).
 
7
See Cariolle (2011) for more details.
 
8
For instance, d’Aiglepierre and Wagner (2013) showed that aid to primary education exerts a significant effect on school enrolment and repetition rates in primary school. Likewise, Arndt et al. (2015) showed that aid can improve school enrolment and reduce infant mortality.
 
9
OECD (2020), “COVID-19 Global Pandemic: Joint Statement by the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD)”, OECD, Paris, https://​www.​oecd.​org/​dac/​development-assistance-committee/​DAC-Joint-Statement-COVID-19.​pdf.
 
10
OECD (2020), “Six decades of ODA: insights and outlook in the COVID-19 crisis”, OECD Development Co-operation Profiles 2020, OECD Publishing, Paris. https://​doi.​org/​10.​1787/​2dcf1367-en.
 
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Metadata
Title
Allocation and Effectiveness of Foreign Aid: An Overview
Authors
Ngoc-Sang Pham
Thi Kim Cuong Pham
Copyright Year
2022
Publisher
Springer Nature Singapore
Book
International Trade, Economic Development, and the Vietnamese Economy

Print ISBN: 978-981-19-0514-8

Electronic ISBN: 978-981-19-0515-5

Copyright Year: 2022

DOI
https://doi.org/10.1007/978-981-19-0515-5_8