Comparing aid flows in the 1990s with those from the 1970s make it clear that there are now many more countries receiving what may be termed "high aid" (say in excess of 30 per cent of GNP) and that there has emerged a group of countries receiving very high aid.Whilst never formally considered in the literature, there is a feeling that such high aid may do more harm than good, a notion which may be captured in an aid Laffer curve.This paper presents an endogenous growth model which exhibits negative returns to aid at high aid levels, and offer some additional reasons as to why such a phenomenon may exist.Finally, empirical evidence is provided from cross-country regressions which confirms the existence of an aid Laffer curve.1.
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