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Macro Aid Effectiveness Research: A Guide for the Perplexed

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  • David Roodman

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.

Suggested Citation

  • David Roodman, 2007. "Macro Aid Effectiveness Research: A Guide for the Perplexed," Working Papers 134, Center for Global Development.
  • Handle: RePEc:cgd:wpaper:134
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    File URL: http://www.cgdev.org/content/publications/detail/15003
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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 11:11:26

    Citations

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    Cited by:

    1. Thomas H. W. Ziesemer, 2011. "From Growth Regressions To Systems Of Equations," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 2(01), pages 121-137.
    2. Axel Dreher & Stephan Klasen & James Raymond Vreeland & Eric Werker, 2013. "The Costs of Favoritism: Is Politically Driven Aid Less Effective?," Economic Development and Cultural Change, University of Chicago Press, vol. 62(1), pages 157-191.
    3. Temple, Jonathan & Van de Sijpe, Nicolas, 2017. "Foreign aid and domestic absorption," Journal of International Economics, Elsevier, vol. 108(C), pages 431-443.
    4. de Haan, A., 2009. "Aid: the drama, the fiction, and does it work?," ISS Working Papers - General Series 18705, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    5. Patrick GUILLAUMONT, 2009. "Aid effectiveness for poverty reduction: macroeconomic overview and emerging issues," Working Papers P05, FERDI.
    6. 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.
    7. Patrick Guillaumont, 2011. "Aid effectiveness for poverty reduction:macroeconomic overview and emerging issues," CERDI Working papers halshs-00554285, HAL.
    8. 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.
    9. Okullo, Samuel J. & Reynès, Frédéric, 2011. "Can reserve additions in mature crude oil provinces attenuate peak oil?," Energy, Elsevier, vol. 36(9), pages 5755-5764.
    10. Lisa Chauvet & Flore Gubert & Sandrine Mesplé-Somps, 2009. "Are Remittances More Effective Than Aid To Reduce Child Mortality? An Empirical Assessment using Inter and Intra-Country Data," Working Papers DT/2009/11, DIAL (Développement, Institutions et Mondialisation).
    11. Lodewijk Smets & Stephen Knack, 2016. "World Bank Lending and the Quality of Economic Policy," Journal of Development Studies, Taylor & Francis Journals, vol. 52(1), pages 72-91, January.
    12. Robert H. Bates & Ghada Fayad & Anke Hoeffler, 2012. "The state of democracy in Sub-Saharan Africa," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 15(4), pages 323-338, December.
    13. Szent-Ivanyi, Balazs, 2010. "Aid Allocation of the Emerging Central and Eastern European Donors," MPRA Paper 30234, University Library of Munich, Germany.
    14. Udvari, Beáta & Dávid Kiss, Gábor & Pontet, Julianna, 2016. "Challenges of Missing Data in Analyses of Aid Activity: The Case of US Aid Activity," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 39(1-2), pages 1-25, March-Jun.
    15. Emmanuel Frot & Javier Santiso, 2011. "Herding in Aid Allocation," Kyklos, Wiley Blackwell, vol. 64(1), pages 54-74, February.
    16. Six, Clemens, 2008. "Was bedeutet Wirksamkeit von Entwicklung? Ein begriffsorientiertes Diskussionspapier," Working Papers 21, Austrian Foundation for Development Research (ÖFSE).
    17. repec:got:cegedp:97 is not listed on IDEAS
    18. 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).
    19. Bah, El-hadj M. & Ward, Jeremy, 2011. "Effectiveness of foreign aid in Small Island Developing States," MPRA Paper 32062, University Library of Munich, Germany.
    20. Felicitas Nowak-Lehmann & Axel Dreher & Dierk Herzer & Stephan Klasen & Inmaculada Martínez-Zarzoso, 2012. "Does foreign aid really raise per capita income? A time series perspective," Canadian Journal of Economics, Canadian Economics Association, vol. 45(1), pages 288-313, February.
    21. Felicitas Nowak-Lehmann D. & Inmaculada Martínez-Zarzoso & Dierk Herzer & Stephan Klasen & Axel Dreher, 2009. "In Search for a Long-run Relationship between Aid and Growth: Pitfalls and Findings," Ibero America Institute for Econ. Research (IAI) Discussion Papers 196, Ibero-America Institute for Economic Research.
    22. Abrams M E Tagem, 2017. "Analysing the determinants of health aid allocation in sub-Saharan Africa," Discussion Papers 2017-09, University of Nottingham, CREDIT.
    23. Gulrajani, Nilima, 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.

    More about this item

    Keywords

    foreign aid; economic growth; data mining;
    All these keywords.

    JEL classification:

    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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