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The Impact of Aid on Economic Growth in Transition Economies: An Empirical Study

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  • Azeta Cungu
  • Johan Swinnen

Abstract

This paper assesses econometrically the contribution of aid to output growth in a panel of twenty transition countries over nine years (1989-1997). The study finds a positive and statistically significant relationship between foreign aid and growth. A second result is that the positive effect of aid seems to be stronger when associated with economic liberalisation. The above findings are important, particularly in light of recent scepticism on the role of aid on developing country economic growth and the recent declining trend in aid commitments from industrialized countries.

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File URL: http://www.econ.kuleuven.be/licos/publications/dp/dp128.pdf
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Bibliographic Info

Paper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 12803.

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Length: 33 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:lic:licosd:12803

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Keywords: economic transition; empirical study; foreign aid; growth; reform.;

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References

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  1. Levy, Victor, 1988. "Aid and growth in Sub-Saharan Africa: The recent experience," European Economic Review, Elsevier, vol. 32(9), pages 1777-1795, November.
  2. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
  3. Burnside, Craig & Dollar, David, 1997. "Aid, policies, and growth," Policy Research Working Paper Series 1777, The World Bank.
  4. Hatzipanayotou, Panos & Michael, Michael S., 1995. "Foreign aid and public goods," Journal of Development Economics, Elsevier, vol. 47(2), pages 455-467, August.
  5. Papanek, Gustav F, 1973. "Aid, Foreign Private Investment, Savings, and Growth in Less Developed Countries," Journal of Political Economy, University of Chicago Press, vol. 81(1), pages 120-30, Jan.-Feb..
  6. Mosley, Paul & Hudson, John & Horrell, Sara, 1987. "Aid, the Public Sector and the Market in Less Developed Countries," Economic Journal, Royal Economic Society, vol. 97(387), pages 616-41, September.
  7. Paul Brenton & Daniel Gros & Guy Vanadille, 1997. "Output decline and recovery in the transiton economies: causes and social consequences," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 5(1), pages 113-130, 05.
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Cited by:
  1. Michael Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting Chickens When They Hatch: The Short-term Effect of Aid on Growth," Working Papers 44, Center for Global Development.

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