Aid Allocation and Poverty Reduction

This paper derives a poverty-efficient allocation of aid and compares it with actual aid allocations. We build the poverty-efficient allocation in two stages. We first utilize new World Bank ratings of twenty different aspects of national policy to establish the current relationship between aid, policies and growth. Onto this we add a mapping from growth to poverty reduction which reflects the level and distribution of income. We compare the effect of using the headcount and poverty-gap measures of poverty.