Aid and Growth Accelerations: An Alternative Approach to Assess the Effectiveness of Aid
AbstractIt continues to be heavily disputed whether foreign aid promotes economic growth in developing countries. In most cross-country regressions, aid is considered effective only if it shifts recipient countries to a significantly higher and sustainable growth path. We apply an alternative approach which is less demanding, based on the concept of temporary growth accelerations suggested by Hausmann, Pritchett and Rodrik. In assessing what can reasonably be expected from the donors’ modest aid efforts, we do not only employ aggregate aid data but we also differentiate between major aid categories, including grants, loans and so-called short-impact aid. It turns out that aid flows have a small but significantly positive effect on the conditional probability of growth accelerations. This result holds across different estimation methods. Short-impact aid is found to be more effective in this respect, while we reject the view that grants are superior to loans. To the contrary, we find a stronger effect of loans. Furthermore, aid has become more effective during the second half of our sample. Typically, however, the significance of results crucially depends on the criteria applied to identify growth accelerations.
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 Kiel Institute for the World Economy in its series Kiel Working Papers with number 1296.
Length: 26 pages
Date of creation: Sep 2006
Date of revision:
Aid Effectiveness; Growth Accelerations; Grants versus Loans; Short-Impact Aid;
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
This paper has been announced in the following NEP Reports:
- NEP-AFR-2006-09-30 (Africa)
- NEP-ALL-2006-09-30 (All new papers)
- NEP-SOC-2006-09-30 (Social Norms & Social Capital)
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.:
- Raghuram G. Rajan & Arvind Subramanian, 2008.
"Aid and Growth: What Does the Cross-Country Evidence Really Show?,"
The Review of Economics and Statistics,
MIT Press, vol. 90(4), pages 643-665, November.
- Raghuram G. Rajan & Arvind Subramanian, 2005. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," NBER Working Papers 11513, National Bureau of Economic Research, Inc.
- Raghuram G. Rajan, 2005. "Aid and Growth: What Does The Cross-Country Evidence Really Show?," Working Papers id:54, eSocialSciences.
- Axel Dreher & Peter Nunnenkamp & Rainer Thiele, 2006.
"Does Aid for Education Educate Children? Evidence from Panel Data,"
Kiel Working Papers
1290, Kiel Institute for the World Economy.
- Axel Dreher & Peter Nunnenkamp & Rainer Thiele, 2008. "Does Aid for Education Educate Children? Evidence from Panel Data," World Bank Economic Review, World Bank Group, World Bank Group, vol. 22(2), pages 291-314, April.
- Dreher, Axel & Nunnenkamp, Peter & Thiele, Rainer, 2008. "Does Aid for Education Educate Children? Evidence from Panel Data," Open Access Publications from Kiel Institute for the World Economy 28827, Kiel Institute for the World Economy (IfW).
- Axel Dreher & Peter Nunnenkamp & Rainer Thiele, 2006. "Does Aid for Education Educate Children? Evidence from Panel Data," KOF Working papers 06-146, KOF Swiss Economic Institute, ETH Zurich.
- Raghuram Rajan & Arvind Subramanian, 2005. "Aid and Growth," IMF Working Papers 05/127, International Monetary Fund.
- Romain Wacziarg & Karen Horn Welch, 2008.
"Trade Liberalization and Growth: New Evidence,"
World Bank Economic Review, World Bank Group,
World Bank Group, vol. 22(2), pages 187-231, June.
- Wacziarg, Romain & Welch, Karen Horn, 2003. "Trade Liberalization and Growth: New Evidence," Research Papers 1826, Stanford University, Graduate School of Business.
- Romain Wacziarg & Karen Horn Welch, 2003. "Trade Liberalization and Growth: New Evidence," NBER Working Papers 10152, National Bureau of Economic Research, Inc.
- Burnside, Craig & Dollar, David, 1997.
"Aid, policies, and growth,"
Policy Research Working Paper Series
1777, The World Bank.
- Michael Clemens & Steven Radelet & Rikhil Bhavnani, 2004.
"Counting Chickens When They Hatch: The Short-term Effect of Aid on Growth,"
44, Center for Global Development.
- Michael A. Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting chickens when they hatch: The short-term effect of aid on growth," International Finance, EconWPA 0407010, EconWPA.
- Hristos Doucouliagos & Martin Paldam, 2005. "Aid Effectiveness on Growth. A Meta Study," Economics Working Papers, School of Economics and Management, University of Aarhus 2005-13, School of Economics and Management, University of Aarhus.
- Kerekes, Monika, 2007. "Analyzing patterns of economic growth: a production frontier approach," Discussion Papers 2007/15, Free University Berlin, School of Business & Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dieter Stribny).
If references are entirely missing, you can add them using this form.