Citation

Discussion Paper Details

Please find the details for DP10880 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Virtuous Circles and the Case for Aid

Author(s): Patrick Carter and Jonathan Temple

Publication Date: October 2015

Keyword(s): Amplification effects, Foreign Aid, Vicious circles and Virtuous circles

Programme Area(s): Macroeconomics and Growth

Abstract: It is sometimes argued that foreign aid leads to a virtuous circle in which growth becomes self-reinforcing. We study two versions of this argument, using a modified neoclassical growth model in which the effects of parameter changes and capital accumulation are amplified. Simulations are used to quantify the welfare benefits from aid transfers. We find that, contrary to expectations, amplification makes only a modest difference to the welfare benefits from aid. This is true even when aid allows a faster exit from a vicious circle or poverty trap.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10880

Bibliographic Reference

Carter, P and Temple, J. 2015. 'Virtuous Circles and the Case for Aid'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10880