A theoretical analysis of the effectiveness of sustainable development assistance on environmental quality

Abstract

A number of empirical studies have been carried out to assess the impact of sustainable development assistance (SDA) and aid on environmental quality in poor countries, but these studies have been characterized by weak theoretical anchor. It is against this background that this paper provides a theoretical basis from which empirical models of the effectiveness and impact of SDA on environmental quality can be derived. The paper applies the classical consumer theory of utility maximization, Keynesian macroeconomic model and further suggests an incentive-based approach (post-cure financial SDA model) in explaining the effectiveness of environmental financing. The theories discussed in this paper confirm the results obtained by previous empirical studies on environmental financing.