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Foreign aid and long-run economic growth: empirical evidence for a panel of developing countries

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  • Georgios Karras

    (University of Illinois at Chicago, Chicago, USA)

Abstract

This paper investigates the relationship between foreign aid and growth in per capita GDP using annual data from the 1960 to 1997 period for a sample of 71 aid-receiving developing economies. The results show that the effect of foreign aid on economic growth is positive, permanent, statistically significant, and sizable: raising foreign aid by $20 per person of the receiving country results in a permanent increase in the growth rate of real GDP per capita by approximately 0.16 per cent. Using an alternative foreign-aid measure, a permanent increase in aid by 1 per cent of the receiving economy's GDP permanently raises the per capita growth rate by 0.14 to 0.26 per cent. Copyright © 2006 John Wiley & Sons, Ltd.

Suggested Citation

  • Georgios Karras, 2006. "Foreign aid and long-run economic growth: empirical evidence for a panel of developing countries," Journal of International Development, John Wiley & Sons, Ltd., vol. 18(1), pages 15-28.
    • Handle: RePEc:wly:jintdv:v:18:y:2006:i:1:p:15-28
    DOI: 10.1002/jid.1187
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    References listed on IDEAS

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