Economics’, which is directed by Tony Addison.

Abstract. -We examine the cyclical properties of development aid using bilateral data for 22 donors and 113 recipients during 1970-2005. We find that bilateral aid flows are on average procyclical with respect to the business cycle in both donor and recipient countries. While aid outlays contract sharply during severe downturns in donor countries, they rise steeply when aid-receiving countries experience large adverse shocks. Our findings suggest that development aid may play an important cushioning role in developing countries, but only during times of severe macroeconomic stress. Our results are robust to alternate definitions of aid flows, specifications, and estimation techniques.

Economics, which is directed by Tony Addison UNU-WIDER gratefully acknowledges the financial contributions to the research programme by the

Since October 2000 Israel and the Palestinians of the West Bank and Gaza Strip have become entangled in a bloody confrontation. This paper focuses on the economic relationship between the Israeli economy and the Palestinian economy of the West Bank and Gaza Strip, and the ways in which this has contributed to the collapse of the Oslo Accord. The paper finds that Israeli policies have distorted and weakened the Palestinian economy, particularly in the areas of trade (dependence upon one major trade partner), taxation (loss of revenues to finance development spending) as well as in the labour market (controls on flows of workers) and in Palestinian access to land (including land confiscation). As a result, poverty and unemployment have risen in the West Bank and Gaza Strip. Resolution of these economic problems is therefore crucial to building a durable peace.

This study has been prepared within the UNU/WIDER project on New Fiscal Policies for Growth and Poverty Reduction which is directed by Tony Addison. UNU/WIDER gratefully acknowledges the financial contribution to the project by the Government of

and Communication’, directed by Tony Addison and Finn Tarp. UNU-WIDER gratefully acknowledges specific programme contributions from the governments of Denmark (Ministry of Foreign Affairs, Danida) and Sweden (Swedish International Development Cooperation Agency—Sida) for ReCom. UNU-WIDER also

This study has been prepared within the UNU-WIDER project ‘ReCom—Research and Communication on Foreign Aid’, directed by Tony Addison and Finn Tarp. UNU-WIDER gratefully acknowledges specific programme contributions from the governments of Denmark (Ministry of Foreign Affairs, Danida) and Sweden

and Communication’, directed by Tony Addison and Finn Tarp. The authors would like to thank Don Hubert for valuable comments on an earlier draft of this paper. UNU-WIDER gratefully acknowledges specific programme contributions from the governments of Denmark (Ministry of Foreign Affairs, Danida

and Communication’, directed by Tony Addison and Finn Tarp. UNU-WIDER gratefully acknowledges specific programme contributions from the governments of Denmark (Ministry of Foreign Affairs, Danida) and Sweden (Swedish International Development Cooperation Agency—Sida) for ReCom. UNU-WIDER also

This study has been prepared within the UNU-WIDER project ‘ReCom—Research and Communication on Foreign Aid’, directed by Tony Addison and Finn Tarp. UNU-WIDER gratefully acknowledges specific programme contributions from the governments of Denmark (Ministry of Foreign Affairs, Danida) and Sweden