Aid Eff ectiveness: New Instrument, New Results?
AbstractDespite a voluminous literature on the topic, the question of whether foreign aid leads to growth is still controversial. To observe the pure effect of aid, researchers used instruments that must be exogenous to growth and explain well aid flows. This paper argues that instruments used in the past do not satisfy these conditions. We propose a new instrument based on predicted aid quantity and argue that it is a significant improvement relative to past approaches. We find a significant and relatively big effect of aid: a one standard deviation increase in received aid is associated with a 1.6 percentage points higher growth rate.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Stockholm Institute of Transition Economics, Stockholm School of Economics in its series SITE Working Paper Series with number 11.
Length: 47 pages
Date of creation: 28 May 2009
Date of revision:
Contact details of provider:
Postal: Stockholm Institute of Transition Economics, Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Phone: (+46 8) 736 9670
Fax: (+46 8) 31 64 22
Web page: http://www.hhs.se/site/
More information through EDIRC
Foreign aid; growth; instrumental variables; GMM;
Find related papers by JEL classification:
- F35 - International Economics - - International Finance - - - Foreign Aid
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Olofsgård, Anders & Perrotta, Maria & Frot, Emmanuel, 2013.
"Aid E ectiveness in Times of Political Change: Lessons from the Post-Communist Transition,"
SITE Working Paper Series
25, Stockholm Institute of Transition Economics, Stockholm School of Economics.
- Frot, Emmanuel & Olofsgård, Anders & Berlin, Maria Perrotta, 2014. "Aid Effectiveness in Times of Political Change: Lessons from the Post-Communist Transition," World Development, Elsevier, vol. 56(C), pages 127-138.
- Olofsgård, Anders & Perrotta, Maria & Frot, Emmanuel, 2012. "Aid Motivation in Early and Mature Partnerships: Is there a difference?," SITE Working Paper Series 17, Stockholm Institute of Transition Economics, Stockholm School of Economics.
- Knack, Stephen, 2013. "Building or bypassing recipient country systems : are donors defying the Paris declaration ?," Policy Research Working Paper Series 6423, The World Bank.
- Knack, Stephen, 2012. "When do donors trust recipient country systems ?," Policy Research Working Paper Series 6019, The World Bank.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Evelina Bonnier).
If references are entirely missing, you can add them using this form.