Foreign Assistance and Consumption Inequality: Does the Structure of Aid Matter?

This paper uses a dataset of 75 countries covering 1960-2010 to examine whether foreign aid has any effect on consumption inequality. The variable of assistance is split into grants and loans – the central hypothesis being different non-linear impact of each on inequality – with the impact of loans being hump-shaped and grants “U”-shaped. The results corroborate the direction and the type of impact that foreign assistance has on inequality. In addition, the outcomes for quartile data subsets show that the relationships between foreign assistance and inequality differ depending on a country’s GDP per capita. However, the hypothesis regarding the influence of coup d’états hasn’t been confirmed.