Support for Aid
Economics: IB Diploma, topic 3.9.3
Support for Aid
Here are some of the positive aspects of different types of aid:
Savings gap
- Less-developed economies (LDEs) have a savings gap and aid can provide a way of filling that gap.
Increasing the LRAS
- Project aid can help with building infrastructure to increase the capital stock, especially energy (e.g. electricity generation, to improve efficiency).
Benefiting human capital
- Aid can improve healthcare outcomes.
Mutual benefit
- Donor countries benefit because recipient countries grow and then demand exports from the donor country.
Test yourself on Support for Aid
Which of the following is NOT a benefit of aid for an LDC?