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Foreign Aid and Market-Liberalizing Reform

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Author Info
JAC C. HECKELMAN
STEPHEN KNACK

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Abstract

Market-oriented economic policies have been strongly linked to faster rates of economic growth. Foreign aid is often provided in part to encourage market-oriented reforms. We analyse the impact of aid on market-liberalizing policy reform, correcting for its potential endogeneity. Results indicate that higher aid slowed reform over the 1980-2000 period, as measured by a broad index of policies. Disaggregating policy into five areas, aid is associated with slower reform in some policy areas but not in others. Disaggregating by decade, the adverse impact of aid on policy reform is much more pronounced for the 1980s than for the 1990s. Copyright (c) The London School of Economics and Political Science 2007.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0335.2007.00623.x
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Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 75 (2008)
Issue (Month): 299 (08)
Pages: 524-548
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Handle: RePEc:bla:econom:v:75:y:2008:i:299:p:524-548

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Heckelman, Jac C. & Powell, Benjamin, 2008. "Corruption and the Institutional Environment for Growth," Working Papers 2008-6, Suffolk University, Department of Economics. [Downloadable!]
  2. Gil S. Epstein & Ira N Gang, 2006. "Decentralizing Aid with Interested Parties," Departmental Working Papers 200629, Rutgers University, Department of Economics. [Downloadable!]
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  3. Epstein, Gil S. & Gang, Ira N., 2008. "Good Governance and Good Aid Allocation," IZA Discussion Papers 3585, Institute for the Study of Labor (IZA). [Downloadable!]
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  4. Heinemann, Friedrich & Tanz, Benjamin, 2008. "The Impact of Trust on Reforms," ZEW Discussion Papers 08-053, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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  5. Mina Baliamoune-Lutz, 2007. "Institutions, Trade, and Social Cohesion in Fragile States," ICER Working Papers 24-2007, ICER - International Centre for Economic Research. [Downloadable!]
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  6. Epstein, Gil S. & Gang, Ira N., 2008. "Poverty and Governance: The Contest for Aid," Working Papers RP2008/76, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
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  7. Martin Gassebner & Noel Gaston & Michael Lamla, 2008. "The Inverse Domino Effect: Are Economic Reforms Contagious?," KOF Working papers 08-187, KOF Swiss Economic Institute, ETH Zurich. [Downloadable!]
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