A Comparative Analysis of ODA and IMF lending on Economic Inequality

Abstract

This paper studies the effects of Official Development Assistance (ODA) and IMF lending on economic inequality and compares the effectiveness of both instruments. To this end, we analyze the channels through which each of these instruments contributes to the reduction of inequality. Then, we propose a panel data model for 85 countries from 2000 to 2019 to test the impact of these two mechanisms on the reduction of inequality. The results suggest that multilateral ODA is more effective in reducing inequality than its bilateral counterpart. Also, it is more effective than the IMF lending. However, our results do not allow to generalize these conclusions to a regional level due to the intrinsic heterogeneity of each region in the world.