Does Foreign Aid Decrease Inequality? Evidence from the Most Recent Data

• Thesis title in Czech: Snižuje rozvojová pomoc nerovnost? Analýza nejnovějších dat
• Thesis title in English: Does Foreign Aid Decrease Inequality? Evidence from the Most Recent Data
• Key words: Nerovnost, Rozvojová Pomoc, Panelová Data
• English key words: Inequality, Foreign Aid, Panel Data
• Academic year of topic announcement: 2017/2018
• Thesis type: Bachelor's thesis
• Thesis language: angličtina
• Department: Institute of Economic Studies (23-IES)
• Supervisor: PhDr. Jaromír Baxa, Ph.D.
• Author: hidden - assigned by the advisor
• Date of registration: 05.06.2018
• Date of assignment: 05.06.2018
• Date and time of defence: 10.06.2019 09:00
• Venue of defence: Opletalova - Opletalova 26, O105, Opletalova - místn. č. 105
• Date of electronic submission: 05.05.2019
• Date of proceeded defence: 10.06.2019
• Opponents: Petr Pleticha, M.Sc., Ph.D.

Guidelines

Research question and motivation
The purpose of development aid is to foster economic prosperity and help with societal problems such as HIV/AIDS or the
consequences of wars and natural disasters. End of poverty is often cited as one of its primary objectives, which has even
been included by the United Nations among the Sustainable Development Goals. In the past, studies focused on its effect on
growth rates (Minoiu & Reddy 2009) whilst others researched the relationship between growth and inequality (Deininger &
Squire 1998, Suresh Babu et al. 2016, Fosu 2017). Yet the link of development aid and inequality has escaped the attention
despite its strict relevance to the assessment of development aid as a whole. The question thus is what effect aid has on
inequality.
Contribution
There is wide array of literature available regarding the impact of development aid on economic growth; nonetheless, little
evidence has be found as to how development aid affects distribution of income in emerging economies. At the same time,
existing studies such as those of Herzer & Nunnenkamp (2012) and Chong et al. (2009) arrive at different conclusions
depending on the sample of countries used. As a result, distributional effects of development aid deserve further attention.

References

Bibliography
● Bjørnskov, C., 2010. Do elites benefit from democracy and foreign aid in developing countries?. Journal of
Development Economics, 92(2), pp.115-124.
● Bornschier, V., Chase-Dunn, C. & Rubinson, R., 1978. Cross-National Evidence of the Effects of Foreign
Investment and Aid on Economic Growth and Inequality: A Survey of Findings and a Reanalysis. American Journal
of Sociology, 84(3), pp.651-683.
● Bulíř, A. & Hamann, A.J., 2006. Volatility of Development Aid: From the Frying Pan into the Fire?. International
Monetary Fund Working Paper.
● Chong, A., Gradstein, M. & Calderon, C., 2009. Can foreign aid reduce income inequality and poverty?. Public
Choice, 140(1-2), pp.59-84.
● Deininger, K. & Squire, L., 1998. New ways of looking at old issues: inequality and growth. Journal of
Development Economics, 57, pp.259–287.
● Fosu, A.K., 2017. Growth, inequality, and poverty reduction in developing countries: Recent global evidence.
Research in Economics, 71, pp.306-336.
● Herzer, D. & Nunnenkamp, P., 2012. The effect of foreign aid on income inequality: Evidence from panel
cointegration. Structural Change and Economic Dynamics, 23(3), pp.245-255.
● Minoiu, C. & Reddy, S.G., 2009. Development Aid and Economic Growth: A Positive Long-Run Relation.
International Monetary Fund Working Paper.
● Neves, P.C., Afonso, Ó. & Silva, S.T., 2016. A Meta-Analytic Reassessment of the Effects of Inequality on Growth.
World Development, 78, pp.386-400.
● Ouedraogo, R. & Marlet, E., 2018. Foreign Direct Investment and Women Empowerment: New Evidence on
Developing Countries. International Monetary Fund Working Paper.
● Persson, T. & Tabellini, G., 1994. Is Inequality Harmful for Growth?. The American Economic Review, 84(3),
pp.600-621.
● Shin, I., 2012. Income inequality and economic growth. Economic Modelling, 29, pp.2049-2057.
Suresh Babu, M., Bhaskaran, V. & Venkatesh, M., 2016. Does inequality hamper long run growth? Evidence from
Emerging Economies. Economic Analysis and Policy, 52, pp.99-113.

Preliminary scope of work

Methodology
Data on development aid, inequality (proxied by the Gini coefficient), and related variables are available and were used by
the existing studies from the databases of the OECD, World Development Indicators of the World Bank, the United Nations
or the Inequality Project of the University of Texas. Advanced econometrics methods will need to be employed to study the
time-series data and draw conclusions thereof.