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Aid, public spending and human welfare: evidence from quantile regressions

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Author Info
Karuna Gomanee (Regents Business School, UK)
Sourafel Girma (School of Economics, Leicester University, Leicester, UK)
Oliver Morrissey (School of Economics, University of Nottingham, Nottingham, UK)

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Abstract

Does aid contribute to human development other than by increasing growth? In doing so, is aid more or less effective in poorer countries (those with low levels of aggregate welfare)? This paper addresses these issues, assessing if there is cross-country aggregate evidence for an effect of aid on welfare levels. We posit that aid can enhance human development by financing public expenditures that increase welfare indicators. Using quantile regressions, we report evidence that aid is associated with higher human development (the Human Development Index) and lower infant mortality (both indicators of aggregate welfare). Where there are differences across quantiles, aid is more effective in countries below the median of the welfare distribution, i.e. with lower levels of human development. Insofar as aggregate welfare is (inversely) correlated with poverty, we find evidence that aid can make a positive contribution to alleviating poverty, and that the effect appears to be greater in countries with lower levels of human development indicators. Copyright © 2005 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jid.1163
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Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

Volume (Year): 17 (2005)
Issue (Month): 3 ()
Pages: 299-309
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Handle: RePEc:wly:jintdv:v:17:y:2005:i:3:p:299-309

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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. Gupta, Sanjeev & Verhoeven, Marijn & Tiongson, Erwin R., 2002. "The effectiveness of government spending on education and health care in developing and transition economies," European Journal of Political Economy, Elsevier, vol. 18(4), pages 717-737, November. [Downloadable!] (restricted)
  2. Mark McGillivray & Oliver Morrissey, 2000. "Aid fungibility in Assessing Aid: red herring or true concern?," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 413-428.
  3. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January. [Downloadable!] (restricted)
  4. P. Guillaumont & L. Chauvet, 2001. "Aid and Performance: A Reassessment," The Journal of Development Studies, Taylor and Francis Journals, vol. 37(6), pages 66-92, August. [Downloadable!] (restricted)
  5. Koenker, Roger & Bassett, Gilbert, Jr, 1982. "Robust Tests for Heteroscedasticity Based on Regression Quantiles," Econometrica, Econometric Society, vol. 50(1), pages 43-61, January. [Downloadable!] (restricted)
  6. Lensink, Robert & Morrissey, Oliver, 1999. "Aid instability as a measure of uncertainty and the positive impact of aid on growth," CDS Research Reports 199906, University of Groningen, Centre for Development Studies (CDS). [Downloadable!]
  7. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February. [Downloadable!] (restricted)
  8. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September. [Downloadable!] (restricted)
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  1. Mogues, Tewodaj & Ayele, Gezagehn & Paulos, Zelekawork & Fan, Shenggen, 2006. "How Effective is Public Spending? Public Investment Composition and Rural Welfare in Ethiopia," 2006 Annual meeting, July 23-26, Long Beach, CA 21258, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  2. Maureen Mackintosh & Kwadwo Mensah & Leroi Henry & Michael Rowson, 2006. "Aid, restitution and international fiscal redistribution in health care: implications of health professionals' migration," Journal of International Development, John Wiley & Sons, Ltd., vol. 18(6), pages 757-770. [Downloadable!]
  3. Ralf Hepp, 2005. "Health Expenditures Under the HIPC Debt Initiative," International Finance 0510005, EconWPA. [Downloadable!]
  4. Jan Pettersson, 2007. "Child Mortality: Is Aid Fungibility in Pro-Poor Expenditure Sectors Decisive?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 143(4), pages 673-693, December. [Downloadable!] (restricted)
  5. Karuna Gomanee & Sourafel Girma & Oliver Morrissey, 2005. "Aid and growth in Sub-Saharan Africa: accounting for transmission mechanisms," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(8), pages 1055-1075. [Downloadable!]
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  6. Paternostro, Stefano & Rajaram, Anand & Tiongson, Erwin R., 2005. "How does the composition of public spending matter?," Policy Research Working Paper Series 3555, The World Bank. [Downloadable!]
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