Inequality, Aid and Growth: Macroeconomic Impact of Aid Grants and Loans in Latin America and the Caribbean

Vázquez, Sergio Tezanos; Quiñones, Ainoa; Guijarro, Marta

doi:10.1016/s1514-0326(13)60007-0

Cited by 24 publications

(24 citation statements)

References 49 publications

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“…This could be construed as aid becoming neutral in the long term. The long‐run aggregate effects of aid could be more apparent when inequalities are dealt with (Tezanos et al ., , p. 153) . Within the context of this essay, there are three main motivations for using inequality as a benchmark for foreign aid: provide incentives for recipient governments to reduce inequality and hence, improve governance; remain consistent with Piketty and prepare for the post‐2015 agenda of sustainable development.…”

Section: Introductionmentioning

confidence: 97%

Reinventing Foreign Aid for Inclusive and Sustainable Development: Kuznets, Piketty and the Great Policy Reversal

Asongu

2015

Journal of Economic Surveys

109

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This survey essay reviews over 200 papers in arguing that in order to achieve sustainable and inclusive development, foreign aid should not orient developing countries towards industrialisation in the perspective of Kuznets but in the view of Piketty. Abandoning the former's view that inequality will fall with progress in industrialisation and placing more emphasis on inequality in foreign aid policy will lead to more sustainable development outcomes. Inter alia: mitigate short-term poverty; address concerns of burgeoning population growth; train recipient governments on inclusive development; fight corruption and mismanagement and; avoid the shortfalls of celebrated Kuznets' conjectures. We discuss how the essay addresses post-2015 development challenges and provide foreign aid policy instruments with which discussed objectives can be achieved. In summary, the essay provides useful policy measures to avoid past pitfalls. 'Output may be growing, and yet the mass of the people may be becoming poorer ' (Lewis, 1955). 'Lewis led all developing countries to water, proverbially speaking, some African countries have so far chosen not to drink ' (Amavilah, 2014). Piketty (2014) has led all developing countries to the stream again and a challenging policy syndrome of our time is how foreign aid can help them to drink.JEL Classification: B20; F35; F50; O10

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Section: Introductionmentioning

confidence: 97%

Reinventing Foreign Aid for Inclusive and Sustainable Development: Kuznets, Piketty and the Great Policy Reversal

Asongu

2015

Journal of Economic Surveys

109

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“…Therefore, we have developed an analytical framework accounting for these two aid modalities: aid grants and aid loans. As previously argued by Chang et al (2002) and Tezanos et al (2013), such a model disentangling overall ODA in these two components should give deeper insight into the existence of perverse aid effects and the extent to which they undermine the potential of aid to boost and sustain growth.…”

Section: A Analytical Frameworkmentioning

confidence: 82%

“…Elsewhere, Tezanos et al (2013) distinguished between two aid modalities (aid loans and aid grants) in Latin America and the Caribbean (LAC) countries, and concluded that the impact of loans was greater than the impact of grants, a result that -according to the authors-supports the use of both aid modalities in a middle-income region such as LAC, despite its long record of debt unsustainability problems.…”

Section: A Analytical Frameworkmentioning

confidence: 99%

Foreign aid distorting effects: an empirical assessment for Sub-Saharan Africa

Pacifique¹,

Vázquez

Molenaers

2019

REM

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Sub-Saharan Africa (SSA) is a key region for the success of the 2030 Agenda for Sustainable Development. However, there is no consensus about the contribution of Official Development Assistance (ODA) in the promotion of economic growth and the reduction of extreme poverty in this region. We therefore build an analytical framework of the distorting effects of foreign aid, and make the subsequent estimations during the period 1991-2014 for SSA. We find four main results: i) ODA to SSA has exerted both distorting and stimulating effects on growth but the latter effects were larger than the former; ii) increasing both aid grants and aid loans, and increasing the ratio of loans to grants, may induce higher growth; iii) however, such a reallocation may only be positive in countries with sustainable debt burdens; and iv) although ODA was effective in aggregate terms, it did not significantly boost the mean income corrected from inequality, which reveals a grave distributional deficiency.

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“…Furthermore, the studies of Ouattara and Strobl (2008) and Annen and Kosempel (2009) evaluated the effectiveness of "technical assistance", assuming that this type of aid stimulates human capital accumulation by facilitating knowledge transfer; nonetheless, these two studies achieved opposite results: the first one claimed the ineffectiveness of this aid, and the second asserted its effectiveness. Finally, Tezanos et al (2012) studied the effectiveness of aid grants and aid loans in Latin America and the Caribbean, suggesting that both were economically and statistically significant, although the estimated growth impact of concessional loans was greater than the impact of grants.…”

Section: Recent Studies On Aggregate Aid Effectivenessmentioning

confidence: 99%

Ayuda e Innovación: ¿un estímulo para la eficacia de la ayuda?

Montellano¹,

Vázquez²

2015

Revista Int. Cooperación Desarro.

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One of the most unanimous results of the economic literature is that innovation is a critical factor for sustained growth. Despite this consensus, previous research has not studied the impact of foreign aid devoted to promote developing countries' innovation capacities. For this reason, this paper analyzes the impact of Official Development Assistance for Science and Technology (ODA-ST) in the period prior to the last international economic recession. The analysis offers five important conclusions for better tailoring aid policies: i) ODA-ST effectively stimulates economic growth; ii) its impact may be higher in countries with low innovation capacities; iii) innovation exerts the strongest impact on growth; iv) income inequalities are an important obstacle for growth; and v) there is a a slow process of divergence in per capita income levels among developing countries. Therefore innovation is confirmed as a strategic "bet" on development, while focusing public foreign aid on enhancing developing countries' innovation capacities -specially in the least innovative ones-may constitute a "boost" to the effectiveness of aid.Keywords: Innovation, aid for science and technology, aid effectiveness, Official Development Assistance (ODA). ResumenUno de los resultados más unánimes de la investigación económica es que la innovación es uno de los principales determinantes de crecimiento económico sostenido. No obstante, ningún estudio ha contrastado el impacto que las ayudas para ciencia y tecnología ejercen sobre el ritmo de crecimiento de los países que las reciben. Este artículo analiza el impacto de la Ayuda Oficial al Desarrollo Científico-Tecnológica (AOD-CT) en el periodo anterior a la última crisis internacional, y ofrece cinco conclusiones relevantes para mejorar las políticas de ayuda: i) la AOD-CT estimula eficazmente el crecimiento; ii) el impacto de estas ayudas puede ser mayor en los países con menores capacidades de innovación; iii) la innovación es el principal determinante del crecimiento, iv) las desigualdades de rentas constituyen una importante obstáculo; y v) los dispares ritmos de progreso de los países en desarrollo se traducen en un lento proceso de divergencia en niveles de renta per cápita. Por lo tanto la innovación se confirma como una "apuesta" estratégica por el desarrollo, por lo que priorizar la mejora de las capacidades de innovación de los países en desarrollo -especialmente de los menos innovadores-puede impulsar la eficacia de la ayuda internacional.Palabras Clave: Innovación, Ayuda para la ciencia y tecnología, eficacia de la ayuda, Ayuda Oficial para el Desarrollo.

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Inequality, Aid and Growth: Macroeconomic Impact of Aid Grants and Loans in Latin America and the Caribbean

Abstract: would like to thank Rogelio Madrueño, Rafael Domínguez and two anonymous referees for their comments and suggestions. We also gratefully acknowledge the financial support of the Spanish Aid Agency (AECID). The views expressed in this paper, however, remain solely those of the authors.

Cited by 24 publications

References 49 publications

Reinventing Foreign Aid for Inclusive and Sustainable Development: Kuznets, Piketty and the Great Policy Reversal

Reinventing Foreign Aid for Inclusive and Sustainable Development: Kuznets, Piketty and the Great Policy Reversal

Foreign aid distorting effects: an empirical assessment for Sub-Saharan Africa

Ayuda e Innovación: ¿un estímulo para la eficacia de la ayuda?

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