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Dynamic aid allocation

Research output: Contribution to journalArticle

  • Paddy W Carter
  • Fabien Postel-Vinay
  • Jonathan R W Temple
Original languageEnglish
JournalJournal of International Economics
DateAccepted/In press - 2015
DatePublished (current) - Mar 2015


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.

    Research areas

  • Aid Allocation, Foreign Aid, Economic Growth


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