aid display slides all 2011

aid display slides all 2011 - Foreign Aid to Africa...

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Unformatted text preview: Foreign Aid to Africa Endorsement of Ending World Poverty plan by leading economists • U2 lead singer Bono introduction to Sachs book: “The plan …of cutting world poverty by half… is a handbook on how we can finish the job…It’s up to us.” The Harrod-Domar growth model • Y=AK • G= dY/Y = A dK/Y =A* I/Y • Proportional relationship between growth and investment, where a is the incremental capital output ratio (ICOR) • Ranges between 2 and 5, with a low number indicating high “quality of investment” Poverty Trap Model • (1) I/Y = S/Y= a + b Y • (2) dY/Y = A dK/Y =A* I/Y • (1) and (2) (3) dY/Y = A* (a+bY) dY/Y Y The classic development model continued • I/Y = F/Y + S/Y • Foreign Aid (F) assumed to go one for one into investment. dY/Y Y With aid Without aid The classic development model continued • I/Y = F/Y + S/Y • Foreign Aid (F) assumed to go one for one into investment. • However, incentive to invest, even if linear model held, would depend on A, tax rate t, and international interest rate r: • dK/K = (1-t)*A - r • If (1-t)*A < r no incentive to invest Chart of knowledge and incentives for aid suppliers Action Feedback Accountability Probability of at least one run with 5 percent significance 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 6 11 16 21 26 Number of independent runs Distribution of t-statistics in published growth regressions 2 4 6 8 10 12 14 . 1 . 2 .....
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aid display slides all 2011 - Foreign Aid to Africa...

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