Abstract
Aid theory in the early period of thinking in economic development was straightforward. The developing countries were perceived to be in need of substantial investments in infrastructure and capital which could not be financed internally. According to the traditional two-gap theory, aid was necessary to bridge both the savings—investment gap and the trade gap in developing countries, and was thus considered indispensable. Aid was advocated for establishing the preconditions for growth by strengthening institutions and building infrastructure and for enhancing growth via resources for investment. The increase in economic activity generated by aid-supported investments was expected to increase output growth, eventually generating enough income to render aid superfluous.
Thanks are due to Safiya Aftab, Tariq Banuri and Zia Mian for comments on an earlier draft. Paper submitted to Oxford Development Studies.
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© 1999 Shahrukh Rafi Khan
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Khan, S.R. (1999). Structural Adjustment, Aid, Debt and Growth. In: Do World Bank and IMF Policies Work?. Palgrave Macmillan, London. https://doi.org/10.1057/9780230373259_2
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DOI: https://doi.org/10.1057/9780230373259_2
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