The Aid paradigm for poverty reduction: Does it make sense?

Abstract

Whilst thinking on economic policy for development has undergone many shifts with the perceived weak results of earlier adjustment reforms a new donor consensus has emerged based around the central themes of economic growth, good governance and social development. This paper examines the logic behind this new Aid paradigm and discusses the empirical evidence to support it. A nuanced story is revealed with country circumstances playing a critical role and particular interventions varying in impact across countries. For example, growth does not always lead to gains for the poor that match the national average; public expenditure needs to be targeted to achieve social development but effective targeting is difficult; governance reform may be critical but there is no simple governance blueprint and the corruption-growth association need not always be negative.