Aid Effectiveness for Poverty Reduction: Lessons from Cross‑country Analyses, with a Special Focus on Vulnerable Countries

Following the adoption of the MDG, particularly the first one that is to reduce poverty by half between 1995 and 2015, numerous studies have examined how external aid can contribute to their achievement. The formula «doubling aid to reduce the poverty by half» relied on the implicit assumption that aid was an effective instrument for poverty reduction. The formula and corresponding assumption have been debated. Two opposite views clearly appeared, one, represented by Jeffrey Sachs in his End of Poverty, underlining the need for a big push to get low income countries out of poverty traps, the other one, illustrated by the attacks of William Easterly against aid as a support of a big push and the idea of a poverty trap, and also including arguments about a limited absorptive capacity. Elsewhere we have argued that the absorptive capacity of aid depends on aid modalities and can be enhanced by a reform of aid, a way by which big push and absorptive capacity views can be reconciled and to which we come back later (Guillaumont and Guillaumont Jeanneney, 2010).   .../...