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Can the two new aid-growth models be replicated?

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  • Peter Jensen
  • Martin Paldam

Abstract

Recent aid effectiveness literature centers on two competing models from the family of conditional models: The Good Policy Model, where the key feature is policy times aid, and the Medicine Model, where it is aid squared. Both models were reached on a sample of 1/3 of the available data. The models are simplified to be replicatable on more of the data. Within-sample the Good Policy Model proves fragile, while the Medicine Model is more robust. Both models fail in out-of-sample replications. A semi-parametric technique is used to test for an unknown functional form of the aid-growth term. It rejects that aid is statistically significant. Copyright Springer Science + Business Media, Inc. 2006

Suggested Citation

  • Peter Jensen & Martin Paldam, 2006. "Can the two new aid-growth models be replicated?," Public Choice, Springer, vol. 127(1), pages 147-175, April.
    • Handle: RePEc:kap:pubcho:v:127:y:2006:i:1:p:147-175
    DOI: 10.1007/s11127-006-0865-4
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    3. Kilby, Christopher & Dreher, Axel, 2010. "The impact of aid on growth revisited: Do donor motives matter?," Economics Letters, Elsevier, vol. 107(3), pages 338-340, June.
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    8. Yang, Suyeon & Park, Sangchan, 2020. "The effects of renewable energy financial incentive policy and democratic governance on renewable energy aid effectiveness," Energy Policy, Elsevier, vol. 145(C).
    9. Teck-Lee Wong & Wee-Yeap Lau & Tien-Ming Yip, 2020. "Cashless Payments and Economic Growth: Evidence from Selected OECD Countries," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 9(special i), pages 189-213.
    10. Liao, Hongwei & Chi, Yedi & Zhang, Jiarui, 2020. "Impact of international development aid on FDI along the Belt and Road," China Economic Review, Elsevier, vol. 61(C).
    11. Axel Dreher & Valentin F. Lang & Sebastian Ziaja, 2017. "Foreign Aid in Areas of Limited Statehood," CESifo Working Paper Series 6340, CESifo.
    12. Chris Doucouliagos & T.D. Stanley, 2013. "Are All Economic Facts Greatly Exaggerated? Theory Competition And Selectivity," Journal of Economic Surveys, Wiley Blackwell, vol. 27(2), pages 316-339, April.
    13. Sergio Tezanos Vázquez, 2009. "Geopolítica de la ayuda ¿Cómo optimizar el impacto de la ayuda sobre el crecimiento?," Documentos de trabajo sobre cooperación y desarrollo 200903, Cátedra de Cooperación Internacional y con Iberoamérica (COIBA), Universidad de Cantabria.
    14. Boateng, Elliot & Agbola, Frank W. & Mahmood, Amir, 2021. "Foreign aid volatility and economic growth in Sub-Saharan Africa: Does institutional quality matter?," Economic Modelling, Elsevier, vol. 96(C), pages 111-127.
    15. Felicitas Nowak-Lehmann D. & Inmaculada Martínez-Zarzoso & Dierk Herzer & Stephan Klasen & Axel Dreher, 2009. "In Search for a Long-run Relationship between Aid and Growth: Pitfalls and Findings," Ibero America Institute for Econ. Research (IAI) Discussion Papers 196, Ibero-America Institute for Economic Research.
    16. Asiedu, Edward & Sadekla, Sylvester S. & Bokpin, Godfred A., 2020. "Aid to Africa’s agriculture towards building physical capital: Empirical evidence and implications for post-COVID-19 food insecurity," World Development Perspectives, Elsevier, vol. 20(C).
    17. Srofenyoh, Francis Yao & Agyei-Henaku, Kofi Aaron Aboa-Offei & Badu-Prah, Charlotte & Agyeiwaa-Afrane, Akua & Gidiglo, Ferguson Korbla & Djokoto, Justice Gameli, 2023. "Aid-to-Production, Consumption and Agricultural Growth in Developing Countries," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 11(4), October.
    18. Askarov, Zohid & Doucouliagos, Hristos, 2015. "Development Aid and Growth in Transition Countries," World Development, Elsevier, vol. 66(C), pages 383-399.
    19. Toke Aidt & Christian Bjørnskov & Peter Kurrild-Klitgaard & Gert Svendsen, 2013. "Public choice, political economy and development: an introduction to the life, times and themes of Martin Paldam," Public Choice, Springer, vol. 157(3), pages 357-365, December.

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