IDEAS home Printed from https://ideas.repec.org/a/phs/prejrn/v56y2019i1and2p219-235.html
   My bibliography  Save this article

Revisiting the aid-growth nexus in light of the Sachs-Easterly debate

Author

Listed:
  • Sarah Lynne S. Daway-Ducanes

    (University of the Philippines)

  • Irene Jo E. Arzadon

    (University of the Philippines)

Abstract

In light of the renewed interest on the aid-growth connection spurred by the recent Sachs-Easterly debates, this note revisits the aid-growth nexus, hypothesizing that aid impacts on growth nonlinearly and that its particular effect conditions on the quality of policies and governance. Using the dynamic panel estimation method, Two-step system generalized method of moments, on more recent data involving an unbalanced panel of 106 countries for the period 1989-2013, we verify some key findings in the aid-growth literature. In particular, aid’s effect on growth is subject to diminishing returns, indicating that there are absorptive capacity constraints that may hinder the effectiveness of aid. However, these absorptive capacity constraints may be relaxed in environments of good governance and policy, enabling aid to have a positive impact on growth.

Suggested Citation

  • Sarah Lynne S. Daway-Ducanes & Irene Jo E. Arzadon, 2019. "Revisiting the aid-growth nexus in light of the Sachs-Easterly debate," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 56(1 and 2), pages 219-235, June and .
    • Handle: RePEc:phs:prejrn:v:56:y:2019:i:1and2:p:219-235
    as

    Download full text from publisher

    File URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/986/884
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    aid; policy; governance; diminishing returns to aid; growth;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:phs:prejrn:v:56:y:2019:i:1and2:p:219-235. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: RT Campos (email available below). General contact details of provider: https://edirc.repec.org/data/seupdph.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.