nep-afr New Economics Papers
on Africa
Issue of 2005‒05‒29
two papers chosen by
Suzanne McCoskey
US Naval Academy

  1. Who deserves aid? Equality of opportunity, international aid and poverty reduction By Denis Cogneau; David Naudet
  2. Foreign aid and developing countries' creditworthiness By Philipp Harms; Michael Rauber

  1. By: Denis Cogneau (DIAL, Paris); David Naudet (DIAL, Paris)
    Abstract: We build and implement a normative procedure to allocate international aid based on equality of opportunity concerning the risk of poverty. This is an alternative to Collier and Dollar’s proposal (2001) which stresses the impact of aid on worldwide poverty reduction. The big problem with their approach, as regards distributive justice, is that it leaves very great inequality in poverty risk between inhabitants of countries with widely varying structural disadvantages. We draw on post-welfarist theories of social justice, especially those of John Roemer. However our proposal is very different to that of Llavador and Roemer (2001), which has serious methodological errors and reaches contradictory conclusions. Our proposed allocations, like those of Collier and Dollar, differ from current aid allocation by giving more to the poorest countries. Apart from this agreement, our equality of opportunity principle takes account of structural disadvantages to growth rather than quality of past policies. Our kind of allocation shares out poverty risks much more fairly among the world’s population, while reducing global poverty almost as effectively as Collier and Dollar\'s.
    Keywords: International aid, Equality of Opportunity, Poverty Reduction
    JEL: F35 I30 D63 O19 O40
  2. By: Philipp Harms (Study Center Gerzensee and University of Konstanz); Michael Rauber (University of Konstanz)
    Abstract: We explore whether foreign aid affects developing countries' creditworthiness, as proxied by the Institutional Investor's measure of country credit risk. Based on a simple model of international borrowing and lending, we develop the hypothesis that aid reduces the likelihood that borrowers in a given country default on their foreign debt. We then test this hypothesis, using a panel data set that covers a large number of developing countries in the 1980s and 1990s. Our empirical findings support the notion that aid improves countries' standing vis-a-vis international capital markets. However, the strength of this effect differs across types of aid and country groups.
    Date: 2004–07

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