The utilization of ODA

Part of the Contributions to Economics book series (CE)


Having analyzed the supply side of development finance (Chap. 2) as well as the process of allocating official funds (Chap. 3) and the manifold im-plications associated therewith, Chap. 4 finally addresses the “demand side” of ODA and the potential channels of aid affecting poverty reduction in a recipient country. The enquiries here are fourfold:
  • How is ODA actually disbursed and utilized in low-income countries (Sect. 4.1)?

  • Does foreign aid lead to poverty reduction via economic growth (Sect.4.2)?

  • What are the interdependencies between ODA, poverty reduction, inequality and economic growth (Sect. 4.3)?

  • What are the macroeconomic consequences of ODA in recipient coun-tries, especially in cases of sudden, large increases of ODA (Sect. 4.4)?


Poverty Line Poverty Reduction Recipient Country Poverty Trap Debt Relief 
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    For each extra dollar of debt relief, recipients of debt relief received approx. 9.6 cents of ODA and 23.8 cents of concenssional loans. The results for additionality of debt forgiveness are less significant and depend on the estimation method. See Ndikumana (2004), p. 336.Google Scholar
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    This term was first used in 1977 by The Economist to describe the gas discoveries on the Netherlands in the 1960s. See also Chowdhury (2004), pp. 5–19 for a detailed survey.Google Scholar
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    Similar effects were observed for minerals in Australia and oil in the UK and Norway. Also the sub-Saharan country Gabon is a case where oil discoveries in the 1970s have led to the Dutch Disease effect of shrinking industrial and agricultural sectors because of the appreciation of the currency and capital movements to the oil sector. See Zafar (2004).Google Scholar
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