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Employing a unique dataset that covers households from six West African capitals, this paper provides new evidence on the demand for informal sector products and services. Authors first investigate whether demand linkages exist between formal and informal products and distribution channels. In a second step, authors estimate demand elasticity's based on Engel curves. Authors find strong demand-side linkages between the formal and informal sector, with the exception that informal goods are hardly bought through formal distribution channels. The estimated demand elasticity's tend to show that rising incomes are associated with a lower propensity to consume informal sector goods and to use informal distribution channels.

AbstractWe show that the impact of foreign aid on bureaucratic quality in recipient countries varies with the mode of delivery. Specifically, grants are found to impair the functioning of the bureaucracy, whereas loans are not. The negative impact of grants is larger when they are given as budget support rather than as assistance for specific projects or for programmes in general. Our results thus suggest that the probability of adverse effects rises with the degree of discretion recipients have over the incoming resources, which is in conflict with donors' recent emphasis on strengthening local ownership by limiting the conditions attached to foreign aid. Copyright © 2010 John Wiley & Sons, Ltd.

We show that the impact of foreign aid on bureaucratic quality in recipient countries varies with the mode of delivery. Specifically, grants are found to impair the functioning of the bureaucracy, whereas loans are not. The negative impact of grants is larger when they are given as budget support rather than as assistance for specific projects or for programs in general.

Non-governmental organizations (NGOs) are widely expected to provide better targeted aid than state agencies with a hidden agenda of commercial and political self-interest. However, principal-agent models question that NGOs decide autonomously on aid allocation. Indeed, we show empirically that NGO aid offers no panacea: The focus of NGOs on the neediest recipients turns out to be surprisingly weak. NGOs hardly make use of the perceived comparative advantage of working in difficult environments." Rather, they are strongly inclined to follow the herd of other NGOs and mimic the allocation behaviour of state agencies, especially if they depend on public co-financing.

The paper examines empirically the proposition that aid to poor countries is detrimental for external competitiveness, giving rise to Dutch disease type effects. At the aggregate level, aid is found to have a positive effect on growth of labour productivity. A sectoral decomposition shows that the effect is significant and positive both in the tradables and the nontradables sectors. The paper thus finds no empirical support for the hypothesis that aid reduces external competitiveness in developing countries. Possible reasons are the existence of large idle labour capacity and high levels of dollarization in financial liabilities at the firm level.

By reallocating aid to where it is needed most and where a productive use is most likely, donors could help alleviate poverty in developing countries. The rhetoric of donors suggests that this insight has increasingly shaped the allocation of aid. We assess the poverty and policy orientation of bilateral and multilateral aid in different ways. In addition to presenting stylized facts based on bivariate correlations, we apply a Tobit model that captures both altruistic and selfish donor motives. We find little evidence supporting the view that the targeting of aid has improved significantly. Most donors provide higher aid to relatively poor countries, but so far the fight against poverty has not resulted in a stronger focus on the most needy recipients. The estimation results reveal that the policy orientation of aid critically depends on how local conditions are measured. Applying the widely used Kaufmann index on the quality of institutions, almost all donors failed to direct aid predominantly to where local conditions were conducive to a productive use of inflows. The response of donors to changing institutional and policy conditions in recipient countries turns out to be fairly weak. In particular, we reject the proposition that multilateral aid is more targeted than bilateral aid in terms of rewarding poor countries with better policies and institutions.

In dieser Untersuchung wird der Frage nachgegangen, was die Konsensdebatte zur Erklärung von Entwicklungsunterschieden zwischen lateinamerikanischen und asiatischen Schwellenländern beitragen kann. Es lassen sich bei allen kritischen Politikfeldern wesentliche Unterschiede feststellen. Ein Vergleich dieser Ländergruppen kann also zur Entwicklung einer umfassenden Reformstrategie für Lateinamerika beitragen, die sich auf vier zentrale Elemente konzentrieren sollte: die Priorität außenwirtschaftlicher Stabilität, die Erleichterung des Technologietransfers, die Bekämpfung der Armut und den Aufbau stabiler Institutionen. ; This paper assesses to what extent the arguments put forward in the consensus debate can help explain the different economic performance of Latin American and Asian countries. The paper shows that Latin America and fast-growing Asia indeed differ significantly with respect to all economic policy areas under consideration. A comparison of these groups of emerging market economies can thus help develop a comprehensive development strategy for Latin America which should focus on four elements: priority for external stability, transfer of best-practice technologies, poverty alleviation, and institution-building.