Aid has a positive impact on growth in developing countries with good fiscal, monetary, and trade policies. Aid appears not to affect policies systematically either for good or for ill. Any tendency for aid to reward good policies has been overwhelmed by donorse pursuit of their own strategic interests. Burnside and Dollar use a new database on foreign aid to examine the relationships among foreign aid, economic policies, and growth of per capita GDP. In panel growth regressions for 56 developing countries and six four-year periods (1970-93), they find that the policies that have a great effect on growth are those related to fiscal surplus, inflation, and trade openness. They construct an index for those three policies and have that index interact with foreign aid. They have instruments for both aid and aid interacting with policies. They find that aid has a positive impact on growth in developing countries with good fiscal, monetary, and trade policies. In the presence of poor policies, aid has no positive effect on growth. This result is robust in a variety of specifications, which include or exclude middle-income countries, include or exclude outliers, and treat policies as exogenous or endogenous. They examine the determinants of policy and find no evidence that aid has systematically affected policies, either for good or for ill. They estimate an aid allocation equation and show that any tendency for aid to reward good policies has been overwhelmed by donors' pursuit of their own strategic interests. In a counterfactual, they reallocate aid, reducing the role of donor interests and increasing the importance of policy. Such a reallocation would have a large positive effect on developing countries' growth rates. This paper - a product of the Macroeconomics and Growth Division, Policy Research Department - is part of a larger effort in the department to study the effectiveness of foreign aid. The study was funded by the Bank's Research Support Budget under research project Economic Policies and the Effectiveness of Foreign Aid (RPO 681-70).

Aid, Policies, and Growth

Amartya Sen (1933–) was born and educated in India before completing his doctorate in economics at Cambridge University. He has taught in India, England, and the United States and is currently the Lamont University Professor at Harvard University. He is one of the most widely read and influential living economists. His books have been translated into more than thirty languages. In 1998, he was awarded the Nobel Price in Economics for his work on welfare economics, poverty and famines, and human development. He has also made major contributions to contemporary political philosophy. In this essay, he proposes that alternatives be appraised by looking to the capabilities they provide for individuals rather than only by individual utilities, incomes, or resources (as in commonly used theories). Introduction Capability is not an awfully attractive word. It has a technocratic sound, and to some it might even suggest the image of nuclear war strategists rubbing their hands in pleasure over some contingent plan of heroic barbarity. The term is not much redeemed by the historical Capability Brown praising particular pieces of land – not human beings – on the solid real-estate ground that they ‘had capabilities’. Perhaps a nicer word could have been chosen when some years ago I tried to explore a particular approach to well-being and advantage in terms of a person's ability to do valuable acts or reach valuable states of being.

Capability and Well-Being

The authors of this paper use a new database on foreign aid to examine the relationships among foreign aid, economic policies, and growth of per capita GDP. In panel growth regressions for 56 developing countries and 6 four-year periods (1970-93), they find that the policies that have a great effect on growth are those related to fiscal surplus, inflation, and trade openness. They construct an index for those three policies and have that index interact with foreign aid. They have instruments for both aid and aid interacting with policies. They find that aid has a positive impact on growth in developing countries with good fiscal, monetary and trade policies. In the presence of poor policies, aid has no positive effect on growth. This result is robust in a variety of specifications, which include or exclude middle-income countries, include or exclude outliers, and treat policies as exogenous or endogenous. They examine the determinants of policy and find no evidence that aid has systematically affected policies, either for good or for ill. They estimate an aid allocation equation and show that any tendency for aid to reward good policies has been overwhelmed by donors' pursuit of their own strategic interests. In a counterfactual, they reallocate aid, reduce the role of donor interests and increasing the importance of policy. Such a reallocation would have a large positive effect on developing countries' growth rates.

Aid, policies, and growth

This article reviews the recent literature on diversification as a livelihood strategy of rural households in developing countries, with particular reference to sub‐Saharan Africa. Livelihood diversification is defined as the process by which rural families construct a diverse portfolio of activities and social support capabilities in order to survive and to improve their standards of living. The determinants and effects of diversification in the areas of poverty, income distribution, farm output and gender are examined. Some policy inferences are summarised. The conclusion is reached that removal of constraints to, and expansion of opportunities for, diversification are desirable policy objectives because they give individuals and households more capabilities to improve livelihood security and to raise living standards.

Household strategies and rural livelihood diversification

We summarize the findings of a recently completed study of the productivity impacts of international crop genetic improvement research in developing countries. Over the period 1960 to 2000, international agricultural research centers, in collaboration with national research programs, contributed to the development of “modern varieties” for many crops. These varieties have contributed to large increases in crop production. Productivity gains, however, have been uneven across crops and regions. Consumers generally benefited from declines in food prices. Farmers benefited only where cost reductions exceeded price reductions.

https://science.sciencemag.org/content/sci/300/5620/758.full.pdf

Assessing the impact of the Green Revolution, 1960 to 2000

Many changes will take place, and must take place, for an underdeveloped country steadily to increase the material well-being of its citizens. These changes can be encouraged or hindered by groups within the country or without; when the encouragement or hindrance comes from without, it is commonly called foreign assistance or foreign aid. Our aim in this essay is to ask which countries lend assistance to which other countries, for what purposes do they lend, and what are the consequences of their aid. As economists addressing ourselves to this subject we should be wary, for we are students who have ignored the teachings of our masters, disciples who have lost our faith. Our discipline seems of little use, our theories unrevealing, or even irrelevant, and our evidence fragmentary and inadequate. Yet it is economists who have generally addressed themselves to these topics, perhaps because foreign assistance initiates a flow of resources, and resources are economic phenomena. But because of our ignorance of subjects other than economics, we may say little of consequence about foreign assistance; and because of our skepticism, what we do say may be what Sheridan called "a string of uncharitable sentiments." Nevertheless, we shall proceed, first, by considering who aids whom; second, by discussing the motives and objectives of the donors; and, finally, by examining the consequences of foreign assistance on economic development. Our method will be largely unscientific and suggestive rather than assertive, consisting of a few ideas, some of which will be defended, others of which will rest only on their plausibility. We should be as happy if our hypotheses were rejected as we would be if they were accepted, for their implications are not generally pleasing.

Foreign Assistance: Objectives and Consequences

Redistributive land reforms have begun to attract the attention of scholars and policy makers once again. In this paper, we review old arguments and bring them up-to-date in the light of recent research. We begin with the case in favour of redistributive reforms focusing on fragmented factor markets and systems of labour control, of which concentration of land ownership is but one aspect. We then examine land reform in practice, focusing on distinct regional features and outcomes in sub-Saharan Africa, Latin America, the transition economies of the former Soviet bloc and, as examples of success, East Asia (including China and Vietnam). Next we discuss the macroeconomic context and the two-way direction of causality between a redistribution of productive assets and the overall performance of the economy. We underline the importance of weakening the system of labour control, eliminating landlord bias and correcting urban bias. Finally, we argue that a prominent feature of all successful land reforms has been a high degree of land confiscation; full compensation and various types of ‘market friendly’ land reform are unlikely to be successful.

/pdf/poverty-and-the-distribution-of-land-4wdg2eadin.pdf

Poverty and the Distribution of Land

The flow of official aid from the members of the OECD Development Assistance Committee rose rapidly until 1961. Thenceforward, however, the total increased rather slowly. In 1961 net official aid, i.e. gross disbursements minus amortisation, was $5,210 million; in 1968 it was $6,471 million.1 This represents an increase over the period of less than a quarter and a trend rate of growth of about 3.1 per cent a year. In the period 1962–8 the annual average rate of increase was 2.5 per cent, i.e. exactly equal to the rate of increase of the population in the underdeveloped countries. In other words, the amount of foreign aid available per caput has not increased since 1962.

https://onlinelibrary.wiley.com/doi/pdf/10.1111/j.1468-0084.1970.mp32002002.x

Foreign capital, domestic savings and economic development

This course will mainly cover the political economy of rural change as societies transform from pre-industrial forms to more industrial. In addition it will consider the state of agricultural class relations worldwide in the context of globalization. During the course of the semester we will compare the classical transition as described by Karl Marx in Capital to more contemporaneous changes occurring in the world. We shall also consider how these changes differ in countries that elected a socialist path of development as compared to a capitalist one. In examining this transition we shall be particularly interested in examining issues of class differentiation, the various “modes of production” debates that took place worldwide, the relationship between productivity and size of holding, changes in the distribution of assets, the creation of wage labour, gender roles, institutional changes and the various ways that accumulation takes place. We shall also consider the role of the state in mid-wifing the transition and in trying to manage the tensions created by this process. The course will end by examining whether the classical agrarian question exists in a globalized world. The course will address the questions above by primarily examining a series of debates on the Agrarian question. We will start by reading the end of Capital on primitive accumulation. This will be followed by an examination of the transition from feudalism in Europe, including Kautsky and Lenin’s work on Agriculture, followed by an examination of the Japanese transition. We will then turn to Mao’s approach as an introduction to the question in the third world. This portion will include examining the Indian Modes of Production Debate, and the Debates in Latin America and Africa focusing on the “Nairobi Debates” in Africa. For the African component given both the state of Africa and the fact that it may not be as common in our curriculum will devote a little more time to questions of transition and African economic history. We will use the last part of the class to look at issues of Land reform today. This will begin with a discussion of the Griffin et al articles and the responses in the Journal of Agrarian Studies, followed by a critical review of the Lipton’s new book on Land reform. While the class will attempt to cover all these questions the particular topics will depend on students’ interests.

The Political Economy of Agrarian Change

Preface - Notes on the Contributors - Introduction K.Griffin & Z.Renwei - PART 1: THE DISTRIBUTION OF INCOME - Household Income and Its Distribution A.R.Khan, K.Griffin, C.Riskin & Z.Renwei - Three Features of the Distribution of Income During the Transition to Reform Z.Renwei - PART 2: INCOME AND WEALTH IN RURAL CHINA - The Determinants of Household Income in Rural China A.R.Khan - The Distribution of Wealth in Rural China T.McKinley - Income Distribution and Poverty in Rural China C.Riskin - PART 3: EMPLOYMENT AND HUMAN CAPITAL - Workers in China's Rural Industries J.Knight & S.Lina - Why Urban Wages Differ in China J.Knight & S.Lina - The Determinants of Educational Attainment J.Knight & L.Shi - Annex: The 1988 Household Sample Survey M.Eichen & Z.Ming - Index

Keith Griffin

Papers

Foreign Assistance: Objectives and Consequences

Poverty and the Distribution of Land

Foreign capital, domestic savings and economic development

The Political Economy of Agrarian Change

The distribution of income in China.