Aid allocation and poverty reduction

The allocation of aid among countries can legitimately refl ect multiple objectives. Aid may be used to rebuild post-confl ict societies, to meet humanitarian emergencies, or to support the strategic or commercial interests of the aidgiver. However, one core objective most commonly cited to support aid programs is poverty reduction. In this chapter, we estimate the allocation of aid that would maximize the reduction in poverty and compare it to actual allocations. Our principal fi nding is that the poverty impact of aid could be roughly doubled if donors made use of recent research fi ndings on the impact of aid in deciding their aid allocation. To the extent that donors are interested in poverty reduction,…