Aid Is Good for the Poor

Aid is good for the poor. This paper uses detailed aid data spanning 60 developing countries over the past two decades to show that social aid significantly and directly benefits the poorest in society, while economic aid increases the income of th...

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Bibliographic Details
Main Authors:	Hirano, Yumeka, Otsubo, Shigeru
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank Group, Washington, DC 2014
Subjects:	AGRICULTURE AID ALLOCATION AVERAGE GROWTH AVERAGE GROWTH RATE AVERAGE INCOME AVERAGE INCOME GROWTH AVERAGE INCOMES AVERAGE RATE BENCHMARKS CAPITAL FLOWS CIVIL SOCIETY CONDITIONAL CONVERGENCE COUNTRY SPECIFIC CROSS-COUNTRY ANALYSES DATA AVAILABILITY DATA SET DEBT DEPENDENT VARIABLE DEVELOPED COUNTRIES DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT AID DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DEVELOPMENT GOALS DEVELOPMENT IMPACT DEVELOPMENT INDICATORS DEVELOPMENT ISSUES DEVELOPMENT POLICY DEVELOPMENT PRACTITIONERS DEVELOPMENT PROCESS DEVELOPMENT STRATEGIES DISTRIBUTIONAL CHANGES DISTRIBUTIONAL EFFECTS DISTRIBUTIONAL IMPACT DOMESTIC RESOURCES ECONOMIC ACTIVITIES ECONOMIC DEVELOPMENT ECONOMIC DOWNTURNS ECONOMIC GROWTH ECONOMIC HISTORY ECONOMIC INTEGRATION ECONOMIC LITERATURE ECONOMIC RESEARCH ECONOMIC REVIEW ECONOMICS ELASTICITY EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EMPIRICAL GROWTH LITERATURE EMPIRICAL MODELS EMPIRICAL RESEARCH EMPIRICAL RESULTS EMPIRICAL STUDIES ERROR TERM ERROR TERMS ESTIMATION RESULTS EXOGENOUS VARIABLES EXPLANATORY POWER EXPLANATORY VARIABLE EXPLANATORY VARIABLES EXPORTS EXTREME POVERTY FINANCIAL CRISIS FISCAL POLICY FIXED EFFECTS FOREIGN AID GDP GINI INDEX GROWTH EMPIRICS GROWTH EQUATIONS GROWTH LITERATURE GROWTH PERFORMANCE GROWTH RATES GROWTH REGRESSION GROWTH REGRESSIONS GROWTH SPELLS GROWTH THEORY HEAD COUNT RATIO HEADCOUNT RATIO HIGH CORRELATION HIGH INFLATION HOUSEHOLD CONSUMPTION HUMANITARIAN AID IMPORTS INCOME DISTRIBUTION INCOME GROUPS INCOME GROWTH INCOME INEQUALITY INCOME LEVELS INCOME SHARE INDUSTRIALIZATION INEQUALITY REGRESSIONS INFLATION RATE INSTITUTIONAL CAPACITY INTERNATIONAL AID INTERNATIONAL DEVELOPMENT INTERNATIONAL TRADE LABOR MARKET LAGGED VALUES LESS DEVELOPED COUNTRIES LONG RUN LONG-RUN GROWTH LOW INCOME LOW-INCOME COUNTRIES MACROECONOMIC FACTORS MACROECONOMIC MANAGEMENT MACROECONOMIC POLICIES MACROECONOMICS MARGINAL EFFECT MEAN INCOME MONETARY POLICY NATIONAL INCOME NATURAL LOGARITHM NEGATIVE COEFFICIENT NEGATIVE CORRELATION NEGATIVE EFFECT NEGATIVE IMPACT NEGATIVE SIGN NET EFFECT 0 HYPOTHESIS PER CAPITA INCOME PER CAPITA INCOMES POLICY CHANGES POLICY DISCUSSIONS POLICY MAKERS POLICY REFORM POLICY RESEARCH POLICY STANCE POLICY VARIABLES POOR COUNTRIES POOR COUNTRY POOR PEOPLE POSITIVE COEFFICIENT POSITIVE CORRELATION POSITIVE EFFECT POSITIVE EFFECTS POSITIVE IMPACT POSITIVE RELATIONSHIP POVERTY CHANGE POVERTY HEADCOUNT POVERTY INDEX POVERTY REDUCTION POVERTY-GROWTH-INEQUALITY TRIANGLE PRO-POOR PROMOTING GROWTH PUBLIC SECTOR QUANTILE REGRESSIONS REDUCING INEQUALITY REDUCING POVERTY REGIONAL DUMMIES REGRESSION ANALYSES REGRESSION RESULTS RICH COUNTRIES SAFETY NET SAVINGS SIGNIFICANCE LEVEL SIGNIFICANT CORRELATION SIGNIFICANT IMPACT SIGNIFICANT NEGATIVE SOCIAL INFRASTRUCTURE SOCIAL SAFETY STRUCTURAL ADJUSTMENT TARGETING TECHNOLOGICAL PROGRESS TRADE OPENNESS TRADE POLICIES TRADE POLICY WORLD DEVELOPMENT INDICATORS
Online Access:	http://documents.worldbank.org/curated/en/2014/08/19914526/aid-good-poor-aid-good-poor http://hdl.handle.net/10986/19397

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Summary:	Aid is good for the poor. This paper uses detailed aid data spanning 60 developing countries over the past two decades to show that social aid significantly and directly benefits the poorest in society, while economic aid increases the income of the poor through growth. This new and unequivocal finding distinguishes the current study from past studies that only utilized aggregate aid data and returned ambiguous results. The paper also confirms that none of the elements of globalization (trade, foreign direct investment, remittances), policies (government expenditure, inflation management), institutional quality, nor other plausibly pro-poor factors have systematic effects on the poor or any other income group, beyond their effects on average incomes. The paper finds that trade and foreign direct investment tend to benefit the richest segments of society more than other income groups. Therefore, the presented evidence suggests that aid can play a crucial role in enabling the poor to benefit more from globalization. These discoveries underscore the need to assist developing countries to find the mix of economic and social aid that jointly promotes the participation of the poor in the development process under globalization. In this manner, aid can make greater strides in spurring development.

Aid Is Good for the Poor

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