Dynamic aid allocation

Patrick Carter, Fabien Postel-Vinay, Jonathan Temple

Research output: Contribution to journalArticle (Academic Journal)peer-review

8 Citations (Scopus)
10 Downloads (Pure)


This paper introduces a framework for studying the optimal dynamic allocation of foreign aid among multiple recipients. We pose the problem as one of weighted global welfare maximization. A donor in the North chooses an optimal path for international transfers, anticipating that consumption and investment decisions will be made by optimizing households in the South, and accounting for limits in the extent to which recipients can effectively absorb aid. We present quantitative results on optimal aid policy by applying our approach to a neoclassical growth model, where the scope for aid-funded growth is determined by the recipients’ distance from steady-state.
Original languageEnglish
Pages (from-to)291-304
Number of pages14
JournalJournal of International Economics
Issue number2
Early online date14 Nov 2014
Publication statusPublished - 1 Mar 2015


  • Aid Allocation
  • Foreign Aid
  • Economic Growth


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