The econometric literature has been unable to establish a robust association between foreign aid and growth and poverty reduction. In this paper, we argue that aid effectiveness must be assessed using methods that go beyond cross-country regressions. We calibrate a dynamic general equilibrium...

Fractious domestic politics are at the root of continued poverty in some developing countries and pose a dilemma for donors and international financial institutions. This paper examines the effects of foreign assistance in countries with plentiful investment opportunities when interest groups...