Aid and Growth: What Does the Cross-Country Evidence Really Show?

We examine the effects of aid on growth in cross-sectional and panel dataafter correcting for the possible bias that poorer (or stronger) growth may draw aid contributions to recipient countries. Even after this correction, we find little robust evidence of a positive (or negative) relationship between aid inflows into a country and its economic growth. We also find no evidence that aid works better in better policy or geographical environments, or that certain forms of aid work better than others. Our findings suggest that for aid to be effective in the future, the aid apparatus will have to be rethought.

[1]  M. Arellano,et al.  Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations , 1991 .

[2]  The Colonial Origins of Comparative Development: An Empirical Investigation , 2000 .

[3]  Camelia Minoiu,et al.  Development Aid and Economic Growth: A Positive Long-Run Relation , 2008, SSRN Electronic Journal.

[4]  James A. Robinson,et al.  The Colonial Origins of Comparative Development: An Empirical Investigation , 2000 .

[5]  D. Dollar,et al.  Aid, Policies, and Growth , 1997 .

[6]  Ross Levine,et al.  New Data, New Doubts: A Comment on Burnside and Dollar's , 2003 .

[7]  X. Sala-i-Martin,et al.  Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (Bace) Approach , 2000 .

[8]  G. Tabellini,et al.  Economic and Political Liberalizations , 2004, SSRN Electronic Journal.

[9]  A. Alesina,et al.  Who Gives Foreign Aid to Whom and Why? , 1998 .

[10]  X. Sala-i-Martin,et al.  I Just Ran Two Million Regressions , 1997 .

[11]  José Tavares.  Does foreign aid corrupt , 2003 .

[12]  Camelia Minoiu,et al.  Development Aid and Economic Growth : A Positive Long-Run Relation , 2009 .

[13]  R. Bailey.  Dissent on Development: Studies and debates in development economics , 1972 .

[14]  T. C. Edens,et al.  Economic Growth , 1957, The Journal of Economic History.

[15]  J. Temple.  Growth Econometrics , 2001, Oxford Research Encyclopedia of Economics and Finance.

[16]  Aart Kraay.  When is Growth Pro-Poor? Cross-Country Evidence , 2004, SSRN Electronic Journal.

[17]  J. Sachs,et al.  Economic Reform and the Process of Global Integration , 1995 .

[18]  J. Stock,et al.  Instrumental Variables Regression with Weak Instruments , 1994 .

[19]  D. Romer,et al.  Does Trade Cause Growth , 1999 .

[20]  Romain Wacziarg,et al.  A Monte Carlo study of growth regressions , 2004 .

[21]  Jong‐Wha Lee,et al.  IMF Programs: Who is Chosen and What are the Effects? , 2002 .

[22]  A. Hadi.  Identifying Multiple Outliers in Multivariate Data , 1992 .

[23]  Henrik Hansen,et al.  Aid and Growth Regressions , 2001 .

[24]  V. Swaroop,et al.  The Implications of Foreign Aid Fungibility for Development Assistance , 1998 .

[25]  R. Stott,et al.  The World Bank , 2008, Annals of tropical medicine and parasitology.

[26]  R. Rajan,et al.  What Undermines Aid's Impact on Growth? , 2005, SSRN Electronic Journal.

[27]  Henrik Hansen,et al.  On the Empirics of Foreign Aid and Growth , 2004 .

[28]  W. Easterly,et al.  Can Foreign Aid Buy Growth , 2003 .

[29]  J. Angrist,et al.  Journal of Economic Perspectives—Volume 15, Number 4—Fall 2001—Pages 69–85 Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments , 2022 .

[30]  S. Collins,et al.  The Empirics of Growth: An Update , 2003 .

[31]  D. Roodman,et al.  The Anarchy of Numbers: Aid, Development, and Cross-Country Empirics , 2003 .

[32]  R. Blundell,et al.  Initial Conditions and Moment Restrictions in Dynamic Panel Data Models , 1998 .

[33]  Paul Collier,et al.  Aid Allocation and Poverty Reduction , 1999 .

[34]  J. Svensson.  Why conditional aid does not work and what can be done about it , 2003 .

[35]  François Bourguignon,et al.  Aid Effectiveness – Opening the Black Box , 2007 .

[36]  Prachi Mishra,et al.  Health Aid and Infant Mortality , 2007, SSRN Electronic Journal.

[37]  鳥居 泰彦,et al.  世界経済・社会統計 = World development indicators , 1998 .

[38]  C. I. Jones,et al.  Why Do Some Countries Produce so Much More Output Per Worker than Others? , 1998 .

[39]  Michael A. Clemens,et al.  Counting Chickens When They Hatch: The Short-Term Effect of Aid on Growth , 2004 .

[40]  Kenneth S. Rogoff,et al.  An Evaluation of World Bank Research, 1998 - 2005 , 2006 .