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Title:Decentralization and foreign aid effectiveness: Do aid modality and federal design matter in poverty alleviation? PDF Logo
Authors:Lessmann, Christian
Markwardt, Gunther
Issue Date:2010
Series/Report no.:CESifo working paper Fiscal Policy, Macroeconomics and Growth 3035
Abstract:This paper empirically studies the impact of decentralization on foreign aid effectiveness. For this purpose, we examine a commonly used empirical growth model, considering aid modality as well as different measures of political and fiscal decentralization. Our panel estimations reveal that fiscal decentralization negatively impacts aid effectiveness, while measures of political decentralization have no significant effect or even a positive one. This result is robust for grants and overall ODA, while the growth impact of other aid types is not generally conditional on decentralization. We therefore conclude that donor countries should carefully consider how both anti-poverty instruments - foreign assistance and decentralization - work together.
Subjects:foreign aid
growth
decentralization
JEL:O10
O20
O40
H70
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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