Handbook on the Economics of Foreign Aid
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Handbook on the Economics of Foreign Aid

Edited by B. Mak Arvin and Byron Lew

It would be fair to say that foreign aid today is one of the most important factors in international relations and in the national economy of many countries – as well as one of the most researched fields in economics. Although much has been written on the subject of foreign aid, this book contributes by taking stock of knowledge in the field, with chapters summarizing long-standing debates as well as the latest advances. Several contributions provide new analytical insights or empirical evidence on different aspects of aid. As a whole, the book demonstrate how researchers have dealt with increasingly complex issues over time – both theoretical and empirical – on the allocation, impact, and efficacy of aid, with aid policies placed at the center of the discussion.
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Chapter 14: The macroeconomic impact of aid in recipient countries: old wine in new bottles?

George Mavrotas

Extract

In his seminal study ‘Does aid work?’, first published almost three decades ago, Robert Cassen argued quite rightly that ‘much of the public discussion of aid has been distorted by prejudice, ideology and selective glimpses of parts of the evidence’ and that ‘most aid does succeed in terms of its own objectives and obtains a reasonable rate of return; but a significant proportion does not’ (Cassen, 1986: 6, 1994). It is also fair to argue that aid is one of the few topics in the development discourse with such an uninterrupted and volatile history in terms of interest and attention from academics, policymakers, and practitioners alike. As Riddell (2007: 2) has put it, ‘aid has managed, repeatedly, to reinvent and renew itself after repeated bouts of uncertainty, doubt and pessimism’. In the early 1990s many observers predicted the ‘end of history’ for development aid following the fall of the Berlin Wall and the end of Cold War. However, recent years have witnessed a revived interest in aid issues. Indeed various developments over the last couple of decades have contributed to that outcome.

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