Aid is proven to be more volatile than fiscal revenues, particularly in highly aid-dependent countries; shortfalls in aid and domestic revenue tend to coincide. Pierre-Richard Agénor and Joshua Aizenman in a highly theoretical paper analyze the impact of this unpredictability:
[Aid] may not only potentially exacerbate the impact of macroeconomic shocks […], but it may also contribute to the emergence, or persistence, of a poverty and low-output trap if aid exerts productive effects–either directly (because donors commit to certain projects) or through its impact on public spending.
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