Egalitarian aid. The impact of aid on Latin American inequality.

González, Mariano and Larrú, José María (2012): Egalitarian aid. The impact of aid on Latin American inequality.

Abstract

Literature on the relationship between aid and inequality is scarce and contradictory. Most studies are based on dynamic panel data using internal instruments to deal with endogeneity. In addition to these techniques, this article introduces the persistency of inequality and a double-censored Gini index. We apply for the first time a dynamic and double-censored panel data estimated applying the Simulated Maximum Likelihood method to a sample of 18 Latin American countries for 1990-2008. The main findings are that public expenditure in consumption and foreign direct investment had a positive effect on inequality whereas aid had a negative (egalitarian) effect. Neither taxes nor public social spending had a significant effect on inequality.

• Item Type: MPRA Paper
• Language: English
• Keywords: dynamic panel data; double censored panel data; inequality; foreign aid; Latin America
• Subjects: F - International Economics > F3 - International Finance > F35 - Foreign Aid; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C24 - Truncated and Censored Models ; Switching Regression Models ; Threshold Regression Models

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