Can Aid Agencies Be Smarter Than the Invisible Hand?
Author: Tim Harford and Michael Klein Date: 6/1/2005 (PDF, 200KB) Private financial flows such as foreign direct investment seem to encourage economic growth and relieve poverty in part because they create excellent incentives for transferring know-how and in part because they are subject to a stern market test that ensures they are allocated and monitored carefully. For aid flows, not automatically subject to these disciplines, it is difficult to be as effective. This Note argues that aid agencies, by learning what makes private flows so effective, can bring better aid to the poorest. For more information on this topic please see our special feature on the Future of Aid.
