Virtuous Circles and the Case for Aid

Abstract

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Aid effectiveness: Human rights as a conditionality measure

“…Looking at the parameters on the two reproduced factors, K and G, they sum to a þ 1 2 : as long as a < 1 2 , this is not large enough to yield endogenous growth, but rather convergent growth with a multiplier relative to the exogenous rate of technical progress, g, of 3 1À2a (so, for example, the multiplier on growth, with a ¼ 0:1, would be 3.75). When a ¼ 1 2 , we have a variant of the Barro (1990) endogenous growth model, which is essentially similar to the model in Carter and Temple (2017) where neoclassical growth is amplified, except that the driver of amplified growth in our model is through taxation and investment in the public good, G.…”

Dynamic aid allocation

“…We could assume that the North is on its balanced growth path and decides to donate a fixed share of its GDP, so that aid to the South grows steadily over time. This would remove the need to model the North explicitly, and Carter (2014) and Carter and Temple (2014) use this simplification. But if we want to study aid generosity, and allow the share of aid in Northern GDP to change over time, then the more general approach of this paper is useful.…”