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Effect of Domestic Capital Formation and Foreign Assistance on Rate of Economic Growth

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Author Info

  • Potiowsky, Thomas

    ()
    (Portland State University Economics - Liberal Arts & Sciences)

  • Qayum, Abdul

    ()
    (Portland State University Economics - Liberal Arts & Sciences)

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    Abstract

    It is universally recognized that income growth of a country is closely related to its rate of capital formation and foreign loans and assistance. This note attempts an empirical verification of this accepted fact based on a simple econometric study of the relationship between the rate of growth of per capita income of 58 developing countries and the per capita gross fixed capital formation and the per capita development assistance from developed countries. The results show that the effect of capital formation is not as great as is generally believed. Marginal output capital ratio is about 16 percent. The more surprising result is that forcing assistance has very small effect on per capita income. The paper lists several plausible explanation for this negligible effect of foreign assistance.

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    Bibliographic Info

    Article provided by Camera di Commercio di Genova in its journal Economia Internazionale / International Economics.

    Volume (Year): 45 (1992)
    Issue (Month): 2 ()
    Pages: 223-228

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    Handle: RePEc:ris:ecoint:0462

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    Cited by:
    1. M.Yusuf Tashrifov, 2005. "Foreign Financial Aid, Government Policies and Economic Growth: Does the Policy Setting in Developing Countries Matter?," International and Development Economics Working Papers idec05-10, International and Development Economics.
    2. Anwer, Muhammad Sarfraz & Sampath, Rajan K., 1999. "Investment And Economic Growth," 1999 Annual Meeting, July 11-14, 1999, Fargo, ND 35713, Western Agricultural Economics Association.

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