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The effect of foreign aid on economic activity of a country can be dampened due to potentially adverse effects on exports through a real exchange rate appreciation. In this study we examine the long-term relationship between export performance and foreign aid in developing countries while accounting for other factors. The estimates of direct effect of foreign aid on exports are imprecise. However, the effect of the quadratic term of foreign aid on exports is negative and precise. This implies large amount of foreign aid does adversely affect export performance. The results are robust to the use of two different export performance measures and different sub-samples.

This paper investigates the impact of foreign aid on foreign investment when foreign aid is used to finance a public consumption good. By formulating and analyzing a three-good general equilibrium model, we show that such foreign aid could crowd out foreign investment, given a factor intensity condition.

This chapter aims to investigate and interpret China’s educational aid by analyzing its history, philosophies, and practices in Africa. The study is based on review and analysis of governmental documents, reports, academic papers, and news by Chinese and foreign scholars on China’s aid, particularly educational aid to Africa. The analysis unveils three transformations of China’s aid “from pro-ideology to de-ideology,” “from single area to multiple areas,” and “from pragmatic economy driven to sustainable and humane economy focused” in Africa. Meanwhile, it indicates a continuity of the philosophy of solidarity, morality, and reciprocity in China’s South-South cooperation with African educational development.

The analysis also shows China’s educational aid does not match well with the framework of the Western donors. China, under the FOCAC framework, is devoted to higher education cooperation, human resources training program, scholarship, and Chinese language education with African partners. With the growth of its economic and political influence, China will play multiple roles as the biggest developing country and as an active promoter and provider for South-South cooperation in the negotiation and construction of the post-2015 agenda. Nevertheless, we assume China will keep a pragmatic higher education cooperation with its developing country partners to inclusively link it with business, technology transfer, and people-to-people exchange.

This study delivers a comprehensive review and analysis of paradigm shift, philosophy, mechanism, and practice of China’s educational aid to Africa to fill up the literature gap in this field. It also timely presents China’s stance toward discussion on the post-2015 agenda.

The fatal conceit is the assumption that the world can be shaped according to human desires. This chapter argues that the logic of the fatal conceit can be applied to foreign interventions which go beyond the limits of what can be rationally constructed by reason alone. In suffering from the fatal conceit, these interventions are characterized by: (1) the realization that intentions do not equal results, (2) a reliance on top-down planning, (3) the view of development as a technological issue, (4) a reliance on bureaucracy over markets, and (5) the primacy of collectivism over individualism. These characteristics explain why interventions extending beyond the limits of what can be rationally constructed tend to fail.

Participation in cross-national assessment is becoming a global phenomenon. While there were only 43 countries that participated in the Programme for International Student Assessment (PISA) in 2000, the number of participating countries/economies has increased to 65 in 2009. To understand this global trend, this chapter seeks to answer the following research questions: What are the real incentives for developing countries to participate in cross-national assessments? What do they gain from actual participation in cross-national assessments, given that there are many constraints and barriers associated with test participation? It employs country-level fixed effects to test the hypothesis that there is a positive association between participation in cross-national assessments and foreign aid to education. This study shows that countries that participate in major cross-national assessments receive, on average, 37 percent more foreign aid to education than countries that do not participate in major cross-national assessments, while holding all other variables constant. Although further research is necessary to make a causal warrant of the association between participation in cross-national assessment and education aid, the results of this study have great implications for developing countries that are considering participating in cross-national assessments.

In the past decade, the effectiveness and efficiency foreign aid (Aid Industry) has generated considerable debate in both of the academic and popular press. Despite spending billions of dollars in foreign aid well over a billion people remain in extreme poverty. This paper did not intend to question the magnitude of the effort or the motives of donors or aid agencies, but rather why the aid programs have not been more effective.

Certain research in behavioral economics, pathological altruism, and emotional empathy may help provide answers. Common to these theories is the idea that well-intentioned actions or policies may cause unintended, harmful consequences to either the donors or the intended beneficiaries of these actions or policies. This paradoxical result is typically due to the altruist’s inability to properly analyze the situation for a variety of reasons. The Aid Industry may be particularly susceptible to these behavioral biases and thus is likely to suffer to some extent from unintended adverse consequences.

This paper focused on ethical considerations at the microlevel, that is, the paper considered the impact of aid on individual’s economic utility and human dignity as opposed to macromeasures such as gross domestic product. Our purpose was to examine how behavioral theories can improve foreign aid efficiency and effectiveness. Using specific examples and considering ethical arguments based on utility and rights theories, we illustrated how these behavioral theories help explain the Aid Industry’s suboptimal results.

This paper examines the effects of foreign aid on emigration and welfare of the remaining residents in an economy producing traded and non-traded goods. There are three distinct types of households: the rich, the poor, and the relatives of emigrants. Donor country's aid is provided to discourage the poor from emigrating. The extent to which it achieves this objective is shown to be an important factor determining the welfare implications of aid for every type of household residing in the economy. The paper also considers the impact of foreign aid on remittance flows and total foreign exchange earnings of the recipient country.

Purpose – This chapter examines whether a small open economy in the presence of a nontraded good produced under a monopolistically competitive market and foreign capital inflow can raise its national welfare by adopting trade liberalization coupled with foreign economic aid.

Methodology/approach – The chapter employs a general equilibrium, comparative static analysis of a small open economy involving two factors and two industries.

Findings – It is shown that an import tariff can raise the welfare of a country or impoverish it, depending on the production and trade structures and preferences of the country, but foreign economic aid is always welfare enhancing. Thus, even when a tariff reduction reduces national welfare, the government still has an incentive to adopt the policy combination of trade liberalization and foreign economic aid.

Originality/value of paper – The results obtained explain a widely recognized fact that economic aid by developed donor countries, trade liberalization and capital market liberalization typically take place simultaneously in developing recipient countries.

This chapter highlights the characteristics of Asia through the analysis of policy-related documents by five donor countries, namely Japan, South Korea, China, India and Thailand. It will also examine the roles played by regional bodies such as the Southeast Asian Ministers of Education Organization (SEAMEO) and ASPBAE (the Asia South Pacific Association for Basic and Adult Education) as the horizontal channels influencing aid policies in respective countries. Together with the analysis of the national and organizational policies, the regional process of building consensus on the post-2015 agenda is examined, with a particular focus on the Asia-Pacific Regional Education Conference (APREC) held in August 2014.

The analysis reveals that the region has two faces: one is imaginary and the other is functional. There is a common trend across Asian donors to refer to their historical ties with regions and countries to which they provide assistance and their traditional notions of education and development. They highlight Asian features in contrast to conventional aid principles and approaches based on the Western value system, either apparently or in a muted manner. In this sense, the imagined community of Asia with common cultural roots is perceived by the policymakers across the board.

At the same time, administratively, the importance of the region as a stage between the national and global levels is recognized increasingly in the multilateral global governance structure. With this broadened participatory structure, as discussed in the chapter ‘Post-EFA Global Discourse: The Process of Shaping the Shared View of the ‘Education Community’’, the expected function of the region to transmit the norms and requests from the global level and to collect and summarize national voices has increased.