To Invest or Insure?

2008 ◽  
Vol 41 (7) ◽  
pp. 971-1000 ◽  
Author(s):  
Joseph Wright
Keyword(s):  
Developing Countries ◽  
Foreign Aid ◽  
Time Horizon ◽  
Positive Impact ◽  
Aid Effectiveness ◽  
Time Horizons ◽  
Positive Growth ◽  
Long Time ◽  
Short Time ◽  
Negative Growth

In this article, the author argues that the time horizon a dictator faces affects his incentives over the use of aid in three ways. First, dictators have a greater incentive to invest in public goods when they have a long time horizon. Second, dictators with short time horizons often face the threat of challengers to the regime; this leads them to forgo investment and instead consume state resources in two forms that harm growth: repression and private pay-offs to political opponents. Third, dictators with short time horizons have a strong incentive to secure personal wealth as a form of insurance in case the regime falls. Using panel data on dictatorships in 71 developing countries from 1961 to 2001, the author finds that time horizons have a positive impact on aid effectiveness: Foreign aid is associated with positive growth when dictators face long time horizons and negative growth when time horizons are short.

scholarly journals Does aid support democracy? A systematic review of the literature

2021 ◽  
Author(s):  
Rachel M. Gisselquist ◽  
Miguel Niño-Zarazúa ◽  
Melissa Samarin
Keyword(s):  
Systematic Review ◽  
Foreign Aid ◽  
Positive Impact ◽  
Analytical Framework ◽  
Aid Effectiveness ◽  
Review Of The Literature ◽  
Agent Based ◽  
The World ◽  
Democracy Building ◽  
Structural Theories

This study draws on a rigorous systematic review—to our knowledge the first in this area—to take stock of the literature on aid and democracy. It asks: Does aid—especially democracy aid—have positive impact on democracy? How? What factors most influence its impact? In so doing, it considers studies that explicitly focus on ‘democracy aid’ as an aggregate category, its subcomponents (e.g. aid to elections), and ‘developmental aid’. Overall, the evidence suggests that i) democracy aid generally supports rather than hinders democracy building around the world; ii) aid modalities influence the effectiveness of democracy aid; and iii) democracy aid is more associated with positive impact on democracy than developmental aid, probably because it targets key institutions and agents of democratic change. The review presents a new analytical framework for considering the evidence, bringing together core theories of democratization with work on foreign aid effectiveness. Overall, the evidence is most consistent with institutional and agent-based theories of exogenous democratization, and least consistent with expectations drawn from structural theories that would imply stronger positive impact for developmental aid on democratization.

scholarly journals Incentives for Conditional Aid Effectiveness

2014 ◽  
Vol 5 (1) ◽  
Author(s):  
Francisco Candel-Sánchez
Keyword(s):  
Developing Countries ◽  
Foreign Aid ◽  
Donor Country ◽  
Aid Effectiveness ◽  
Time Inconsistency ◽  
Structural Reforms ◽  
Aid Programs ◽  
The Cost ◽  
Recipient Government ◽  
Privately Owned

AbstractCan sanctions against foreign aid donors enhance the credibility of conditional aid policies? If such policies suffer from time inconsistency, the answer is positive. This paper proposes a mechanism to overcome the lack of credibility of conditional aid donations to developing countries. A scheme of policy-dependent transfers to the donor country is shown to achieve an optimal commitment outcome by improving the credibility of conditional aid programs. The scheme is devised to cover situations in which the cost of structural reforms is information privately owned by the recipient government.

Environmental shocks, civil conflict and aid effectiveness

2021 ◽  
pp. 073889422110152
Author(s):  
Seok Joon Kim
Keyword(s):  
Developing Countries ◽  
Longitudinal Data ◽  
Natural Disasters ◽  
Foreign Aid ◽  
Civil Conflict ◽  
Aid Effectiveness ◽  
Civil Conflicts ◽  
Marginalized Groups ◽  
Environmental Shocks

Do natural disasters promote conflict or peace? A series of analyses of longitudinal data between 1971 and 2011 shows the modest but significant impact of natural disasters on the likelihood of conflict, conditional on the level of foreign aid in developing countries. This paper argues that frequent natural disasters, through the legitimacy effect and monitoring effect, allow foreign aid to be channeled to marginalized groups and used for its intended development purpose, eventually lowering the likelihood of conflict. This study is the first to incorporate an examination of foreign aid into an analysis of natural disasters and civil conflicts.

Aid, Policies, and Growth

2000 ◽  
Vol 90 (4) ◽  
pp. 847-868 ◽  
Author(s):  
Craig Burnside ◽  
David Dollar
Keyword(s):  
Developing Countries ◽  
Foreign Aid ◽  
Positive Impact ◽  
Trade Policies ◽  
Economic Policies ◽  
Per Capita Gdp ◽  
Small Impact ◽  
Per Capita ◽  
Good Policy

This paper uses a new database on foreign aid to examine the relationships among foreign aid, economic policies, and growth of per capita GDP. We find that aid has a positive impact on growth in developing countries with good fiscal, monetary, and trade policies but has little effect in the presence of poor policies. Good policies are ones that are themselves important for growth. The quality of policy has only a small impact on the allocation of aid. Our results suggest that aid would be more effective if it were more systematically conditioned on good policy. (JEL F350, O230, O400)

scholarly journals Aid Effectiveness in Fragile States

2021 ◽  
pp. 493-520
Author(s):  
Francesca G. Caselli ◽  
Andrea F. Presbitero
Keyword(s):  
Developing Countries ◽  
Foreign Aid ◽  
Developing Country ◽  
Social Performance ◽  
Aid Effectiveness ◽  
Fragile States ◽  
Success Rates ◽  
Fragile State ◽  
Percentage Points ◽  
Level Data

Fragile states are highly dependent on foreign aid and are characterized by several features that impair their economic and social performance. This chapter reviews the literature on aid effectiveness and presents several stylized facts on aid flows to fragile states and exploits project-level data to provide evidence on aid effectiveness in fragile states. Comparing project success rates across fragile and other developing countries confirms that aid given to fragile states is less likely to be effective than elsewhere. Our results indicate that a project implemented in a fragile state is about 8 percentage points less likely to be successful than a similar project financed in another developing country. Our analysis does not imply that aid to fragile states should be reduced across the board, but points to several factors that could hamper the growth dividend of aid.

Foreign Aid and Peacebuilding

2021 ◽  
pp. 531-548
Author(s):  
Rachel M. Gisselquist
Keyword(s):  
Foreign Aid ◽  
Positive Impact ◽  
Aid Effectiveness ◽  
Future Research ◽  
Fragile States ◽  
Positive Role ◽  
Financial Flows ◽  
Do No Harm ◽  
Negative Impacts

Foreign aid is a core component of peacebuilding and among the largest external financial flows to fragile states and conflict-affected areas. Nevertheless, troubling critiques have been raised about its overall impact and effectiveness. Some of the most troubling speak to whether it has succeeded even to do no harm. These important critiques notwithstanding, aid has also played a positive role in many countries. Given that improving aid for peacebuilding is a clear priority for global development, building a base of knowledge that informs better aid interventions is a priority for future research. It is important to better understand not only what has not worked but also what has worked, why, and the likely transferability of findings to other contexts. This chapter begins with consideration of the role of aid in conflict-affected societies and the ways in which aid may support peacebuilding. It then turns to why aid may not realize such positive impact, including the challenges of aid effectiveness in weak states and key (unintended) negative impacts on public accountability, state capabilities, and violence. It discusses how to improve aid impact and effectiveness, focusing on issues of context, local ownership, and building state capabilities.

LONG-TERM PREDICTION MARKETS

2013 ◽  
Vol 6 (3) ◽  
pp. 43-61 ◽  
Author(s):  
Werner Antweiler
Keyword(s):  
Time Horizon ◽  
Market Liquidity ◽  
Prediction Markets ◽  
Analytic Framework ◽  
Long Time ◽  
Participation Constraint ◽  
Winner Takes All ◽  
Individual Traders ◽  
Short Time

Most prediction markets focus on events with a short time horizon such as forthcoming elections. Contracts are typically traded for periods measured in weeks, but rarely exceeding a year. There is great interest in using prediction markets for events with a long time horizon such as climate change outcomes. This paper develops an analytic framework for exploring the time horizon limitations of prediction markets and suggests a simple, practical solution: the market operator must invest cash holdings in a diversified financial portfolio that generates returns that reflect individual traders’ heterogeneous attitudes towards risk and return. The analytic framework identifies how the presence of an opportunity cost for investors reduces market liquidity through a participation constraint and biases the equilibrium price through an inherent money-at-risk asymmetry between long and short positions in a prediction market. This paper explores continuous outcome markets, which are relevant for science-related long-term predictions, along with familiar winner-takes-all markets.

scholarly journals The fiscal benefits of repeated cooperation: coalitions and debt dynamics in 36 democracies

2016 ◽  
Vol 37 (2) ◽  
pp. 143-172 ◽  
Author(s):  
David Weisstanner
Keyword(s):  
Economic Reforms ◽  
Debt Accumulation ◽  
Coalition Governments ◽  
Specific Policy ◽  
The Past ◽  
Time Horizons ◽  
Policy Goals ◽  
Debt Dynamics ◽  
Long Time ◽  
Short Time

AbstractDo coalition governments really suffer from short time horizons in fiscal policymaking, as posited by standard political-economy models? This article focusses on coalitions that have created high levels of familiarity through shared governing experiences in the past and that are likely to cooperate again in future governing coalitions. I argue that such coalitions have incentives to internalise the future costs of debt accumulation and reach credible agreements to balance their constituencies’ fiscal preferences. Moreover, sustaining broad coalitions should have electoral advantages to implementing controversial economic reforms, thus resulting in lower debt increases compared not only with less durable coalitions but also with single-party governments. Comparing 36 economically advanced democracies between (up to) 1962 and 2013, I estimate the effects of coalitions’ cooperation prospects on the dynamics of public debt. The findings indicate that long time horizons can help coalitions to overcome intertemporal coordination problems and to reach specific policy goals.

Does institutional quality affect capital mobility? Evidence from developing countries

2009 ◽  
Vol 5 (2) ◽  
pp. 207-223 ◽  
Author(s):  
JAVED YOUNAS
Keyword(s):  
Developing Countries ◽  
Foreign Aid ◽  
Capital Mobility ◽  
Positive Impact ◽  
Institutional Quality ◽  
Democratic Accountability ◽  
Domestic Investment ◽  
Savings Rate ◽  
Domestic Savings ◽  
The Impact

AbstractThis paper uses an augmented Feldstein–Horioka savings–investment methodology to examine the impact of institutional quality on the degree of capital mobility in developing countries. A high correlation between domestic investment and domestic savings can arise from the presence of institutional rigidities restricting the movement of capital across borders. We find that including different aspects of institutional quality raises the coefficient of the savings rate, implying lower capital mobility. However, the improvement in institutional quality that strengthens the legal system, reduces investment risks, and ensures democratic accountability, increases capital mobility in developing countries. Inclusion of foreign aid also has a positive impact on the coefficient of the savings rate.

Adjoint sensitivity and optimal perturbations of the low-speed jet in cross-flow

2019 ◽  
Vol 877 ◽  
pp. 330-372
Author(s):  
Marc A. Regan ◽  
Krishnan Mahesh
Keyword(s):  
Shear Layer ◽  
Time Horizon ◽  
Cross Flow ◽  
Adjoint Equations ◽  
Low Speed ◽  
Time Horizons ◽  
Jet In Cross Flow ◽  
Jet Nozzle ◽  
The Cross ◽  
Short Time

The tri-global stability and sensitivity of the low-speed jet in cross-flow are studied using the adjoint equations and finite-time horizon optimal disturbance analysis at Reynolds number $Re=2000$, based on the average velocity at the jet exit, the jet nozzle exit diameter and the kinematic viscosity of the jet, for two jet-to-cross-flow velocity ratios $R=2$ and $4$. A novel capability is developed on unstructured grids and parallel platforms for this purpose. Asymmetric modes are more important to the overall dynamics at $R=4$, suggesting increased sensitivity to experimental asymmetries at higher $R$. Low-frequency modes show a connection to wake vortices. Adjoint modes show that the upstream shear layer is most sensitive to perturbations along the upstream side of the jet nozzle. Lower frequency downstream modes are sensitive in the cross-flow boundary layer. For $R=2$, optimal analysis reveals that for short time horizons, asymmetric perturbations dominate and grow along the counter-rotating vortex pair observed in the cross-section. However, as the time horizon increases, large transient growth is observed along the upstream shear layer. When $R=4$, the optimal perturbations for short time scales grow along the downstream shear layer. For long time horizons, they become hybrid modes that grow along both the upstream and downstream shear layers.

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