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Is aid the capital component making countries efficient?

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Author Info

  • Veiderpass, Ann

    ()
    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Andersson, Per-Åke

    ()
    (Department of Economics, School of Business, Economics and Law, Göteborg University)

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    Abstract

    Cross country regressions on aid effectiveness have failed to provide substantial evidence on the effects of foreign aid. This study focuses on country performance in a production theory context. By means of the non-parametric DEA method, we study 60 individual low and middle income countries between 1995 and 2000. Is there a systematic correlation between resource intensity and country efficiency? We find indications of a positive relation between capital intensity and country efficiency. We then investigate whether aid is the conclusive part of capital providing this correlation, but when linking country efficiency development to aid, there is no clear pattern to be found.

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    File URL: http://hdl.handle.net/2077/18966
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    Bibliographic Info

    Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 333.

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    Length: 30 pages
    Date of creation: 12 Jan 2009
    Date of revision:
    Handle: RePEc:hhs:gunwpe:0333

    Contact details of provider:
    Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
    Phone: 031-773 10 00
    Web page: http://www.handels.gu.se/econ/
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    Keywords: Aid; efficiency; country comparison; production approach;

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    1. Forsund, Finn R & Hjalmarsson, Lennart, 1979. "Generalised Farrell Measures of Efficiency: An Application to Milk Processing in Swedish Dairy Plants," Economic Journal, Royal Economic Society, vol. 89(354), pages 294-315, June.
    2. P. Guillaumont & L. Chauvet, 2001. "Aid and Performance: A Reassessment," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 66-92.
    3. Isgut, Alberto & Tello, Mario & Veiderpass, Ann, 1998. "Microeconomic Adjustment During Structural Reforms: The Nicaraguan Manufacturing Sector 1991-1995," Working Papers in Economics 11, University of Gothenburg, Department of Economics.
    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.
    5. C-J. Dalgaard & H. Hansen, 2001. "On Aid, Growth and Good Policies," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 17-41.
    6. Collier, Paul & Hoeffler, Anke, 2002. "Aid, policy, and growth in post-conflict societies," Policy Research Working Paper Series 2902, The World Bank.
    7. Raghuram G. Rajan & Arvind Subramanian, 2005. "What Undermines Aid's Impact on Growth?," NBER Working Papers 11657, National Bureau of Economic Research, Inc.
    8. William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
    9. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April.
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