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|Title:||Institutions, inequality and the impact of foreign aid : a simultaneous equation approach|
|Authors:||Torres Ledezma, Sebastián Generoso|
|Presented at:||University of Leicester|
|Abstract:||This study extends existing work on inequality, institutions and the impact of foreign aid by constructing and estimating different cross-country simultaneous equation models that identify bi-directional relationships between income inequality and several indicators of social and economic development. The first set of results for a model combining four endogenous variables (income, education, health and inequality) and estimated using the three-stage least-squares (3SLS) technique, show that lower inequality is associated with improvements in other development indicators, but this is the result of several complex interactions. The most interesting feature of the structural model is the insight it provides into the reasons behind the negative "Africa dummy" in previous growth studies: African countries are not unusually inefficient, given socio-economic conditions, but are unusually unhealthy and unusually inequitable. A new cross-country dataset (the World Bank's Health Nutrition and Poverty Data), is used to assess the impact of foreign aid on the living standards of population sub-groups within 48 developing countries by estimating: (i) the strength of the links between a number of Millennium Development Goals (MDGs) targets and related variables, including access to water and sanitation; and (ii) the extent to which aid impacts on these variables. In doing so, the analysis provides direct evidence on factors driving inequality by employing data for different income groups in each country and by using a unique measure of material wellbeing that does not rely on purchasing power parity (PPP) comparisons. The empirical results show that foreign aid can be expected to improve outcomes across a wide variety of development indicators, including school participation ratios and child health. The study finally focuses on the robust estimation of the long-run impact of political institutions on economic development and on the identification of valid instruments to measure institutional quality. While recent empirical studies have used colonial settler mortality rates as such an instrument, this thesis develops a more eclectic theory of colonial development.|
|Rights:||Copyright © the author. All rights reserved.|
|Appears in Collections:||Theses, Dept. of Economics|
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