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

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Author Info
Georgios Karras (University of Illinois at Chicago, Chicago, USA)

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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.

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File URL: http://hdl.handle.net/10.1002/jid.1187
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Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

Volume (Year): 18 (2006)
Issue (Month): 1 ()
Pages: 15-28
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Handle: RePEc:wly:jintdv:v:18:y:2006:i:1:p:15-28

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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. Henrik Hansen & Finn Tarp, 2000. "Aid effectiveness disputed," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 375-398.
  2. William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer. [Downloadable!] (restricted)
  3. Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 495-525, May. [Downloadable!] (restricted)
  4. Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2004. "On The Empirics of Foreign Aid and Growth," Economic Journal, Royal Economic Society, vol. 114(496), pages F191-F216, 06. [Downloadable!] (restricted)
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  5. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May. [Downloadable!] (restricted)
  6. Alesina, Alberto & Dollar, David, 2000. " Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March. [Downloadable!] (restricted)
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  7. Tavares, Jose, 2003. "Does foreign aid corrupt?," Economics Letters, Elsevier, vol. 79(1), pages 99-106, April. [Downloadable!] (restricted)
  8. John Hudson, 2004. "Introduction: Aid and Development," Economic Journal, Royal Economic Society, vol. 114(496), pages F185-F190, 06. [Downloadable!] (restricted)
  9. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May. [Downloadable!] (restricted)
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  10. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February. [Downloadable!] (restricted)
  11. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April. [Downloadable!] (restricted)
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  1. Derek Headey, 2008. "Geopolitics and the effect of foreign aid on economic growth: 1970-2001," Journal of International Development, John Wiley & Sons, Ltd., vol. 20(2), pages 161-180. [Downloadable!]
  2. Rao, B. Bhaskara & Sharma, K.L. & Singh, Rup & Lata, Nalini, 2007. "A Survey of Growth and Development Issues of the Pacific Islands," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
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