The present paper shows that the savings motive critically affects the size and sign of scale effects in standard endogenous growth models. If the bequest motive dominates, the scale effect is positive. If the life-cycle motive dominates, the scale effect is ambiguous and may even be negative.

The present paper examines the macroeconomic impact of aid, by introducing endogenous aid allocations into a neoclassical growth framework. On this basis it is shown that donor policies can have important implications for the trajectory of recipients' GDP per capita. Depending on specific donor...