Reasonable Expectations and the First Millennium Development Goal: How Much Can Aid Achieve?

SummaryUsing a calibrated neoclassical growth model, we address three questions: (i) how much growth should aid flows have produced in Sub-Saharan Africa over the last three decades? (ii) how much aid would be needed to attain the First Millennium Development Goal (MDG#1) of cutting poverty in half by 2015? (iii) taking proposed aid flows as given, how much would structural characteristics, such as domestic savings rates and productivity, have to change in order to reach the MDG#1? Our analysis indicates that past and future expectations for aid in fostering growth and poverty reduction have been too high.