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Macro Aid Effectiveness Research: A Guide for the Perplexed

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  • David Roodman

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Abstract

Like many public policy debates, that over whether foreign aid works carries on in two worlds. Within the research world, it plays out in the form of papers full of technical language, formulas, and numbers. Outside, the arguments are plainer and the audience broader, but those academic studies remain a touchstone. While avoiding jargon, this paper reviews recent, contending studies of how much foreign aid affects country-level outcomes such as economic growth and school attendance rates. This particular kind of study is ambitious: it is far easier to evaluate a school-building project, say, on whether the school was built and children filled its seats than to determine whether all aid, or large subcomponents of it, made the economy grow faster. Because of its ambition, this literature has attracted attention from those hoping for clear answers on whether aid "works.' On balance, the quantitative approach to exploring grand questions about aid effectiveness, which began 40 years ago, was worth trying and is probably worth pursuing somewhat further. But the literature will probably continue to disappoint as often as it offers hope. Perhaps the biggest challenge is going beyond documenting correlations to demonstrating causation—not just that aid went hand-in-hand with economic growth, but caused it. Aid has eradicated diseases, prevented famines, and done many other good things. But given the limited and noisy data available, its effects on growth in particular probably cannot be detected.

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Bibliographic Info

Paper provided by Center for Global Development in its series Working Papers with number 134.

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Length: 21 pages
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:cgd:wpaper:134

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Web page: http://www.cgdev.org

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Keywords: foreign aid; economic growth; data mining;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Should aid focus on economic development? (part 2)
    by Terence Wood in Development Policy Blog on 2011-05-25 06:11:26
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Cited by:
  1. Thomas Ziesemer, 2011. "Growth with endogenous migration hump and the multiple, dynamically interacting effects of aid in poor developing countries," Applied Economics, Taylor & Francis Journals, vol. 43(30), pages 4865-4878.
  2. Nilima Gulrajani, 2010. "Re-imagining Canadian development cooperation: a comparative examination of Norway and the UK," LSE Research Online Documents on Economics 30036, London School of Economics and Political Science, LSE Library.
  3. Patrick GUILLAUMONT, 2009. "Aid effectiveness for poverty reduction: macroeconomic overview and emerging issues," Working Papers P05, FERDI.
  4. Szent-Ivanyi, Balazs, 2010. "Aid Allocation of the Emerging Central and Eastern European Donors," MPRA Paper 30234, University Library of Munich, Germany.
  5. Léonce Ndikumana, 2013. "Applying Evaluation to Development and Aid: Can Evaluation Bridge the Micro-macro Gaps in Aid Effectiveness?," Published Studies article-leonce-ndikumana-, Political Economy Research Institute, University of Massachusetts at Amherst.
  6. Patrick Guillaumont, 2011. "Aid effectiveness for poverty reduction:macroeconomic overview and emerging issues," Working Papers halshs-00554285, HAL.
  7. Bah, El-hadj M. & Ward, Jeremy, 2011. "Effectiveness of foreign aid in Small Island Developing States," MPRA Paper 32062, University Library of Munich, Germany.
  8. Patrick GUILLAUMONT, 2009. "Aid effectiveness for poverty reduction: macroeconomic overview and emerging issues," Working Papers P05, FERDI.
  9. Sanyal, Prabuddha & Babu, Suresh, 2008. "Aid effectiveness and capacity development: Implications for economic growth in developing countries," IFPRI discussion papers 838, International Food Policy Research Institute (IFPRI).

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