We develop a theoretical model of foreign aid to analyse a method of disbursement of aid which induces the recipient government to follow a more pro-poor policy than it otherwise would do. In our two-period model, aid is given in the second period and the volume of it depends on the level of...

The inflow of large quantities of foreign aid into Rwanda since 1994 can have potential adverse effects such as aid dependency via a significant negative effect on tax efforts and on public investments. This paper carries out a theoretical and empirical study to examine these issues. The...

We develop a political-economic model of foreign aid allocation. Each ethnic group in the donor country lobbies the government for allocating more aid to its country of origin, and the government accepts contributions from lobby groups. Initial per-capita income of the recipients and those of...