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Evaluating Aid Effectiveness in the Aggregate: Methodological Issues

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  • Carl-Johan, Dalgaard
  • Henrik, Hansen

Abstract

The purpose of the present Evaluation Study is to discuss the methodological problems researchers are facing in gauging the impact of aid on economic growth. The discussion is nontechnical and aimed at an audience without much prior knowledge in the fields of macroeconomics and econometrics. The paper provides insights into the following questions: 1. Why do economists view “aid effectiveness” as synonymous to asking whether aid increases growth in income per capita? 2. Why is it difficult to determine the macroeconomic impact of foreign aid on economic growth? 3. How is it, in principle, possible to solve the difficulties present in evaluating aggregate aid effectiveness?

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 23025.

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Date of creation: Mar 2009
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Handle: RePEc:pra:mprapa:23025

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Keywords: Economic growth; foreign aid; instrumental variable regression;

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References

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  1. C-J. Dalgaard & H. Hansen, 2001. "On Aid, Growth and Good Policies," Journal of Development Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 37(6), pages 17-41.
  2. Block, Steven A., 2001. "Does Africa grow differently?," Journal of Development Economics, Elsevier, Elsevier, vol. 65(2), pages 443-467, August.
  3. Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2001. "On the Empirics of Foreign Aid and Growth," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 03-13, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Sep 2003.
  4. Henrik Hansen & Finn Tarp, 2000. "Aid effectiveness disputed," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 375-398.
  5. Winford H. Masanjala & Chris Papageorgiou, 2008. "Rough and lonely road to prosperity: a reexamination of the sources of growth in Africa using Bayesian model averaging," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 23(5), pages 671-682.
  6. Griffin, Keith B & Enos, J L, 1970. "Foreign Assistance: Objectives and Consequences," Economic Development and Cultural Change, University of Chicago Press, vol. 18(3), pages 313-27, April.
  7. Sudhir Anand and Amartya Sen, 2000. "The Income Component of Human Development Index," Human Development Occasional Papers (1992-2007), Human Development Report Office (HDRO), United Nations Development Programme (UNDP) HDOCPA-2000-01, Human Development Report Office (HDRO), United Nations Development Programme (UNDP).
  8. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
  9. Sudhir Anand & Amartya Sen, 2000. "The Income Component of the Human Development Index," Journal of Human Development and Capabilities, Taylor & Francis Journals, Taylor & Francis Journals, vol. 1(1), pages 83-106.
  10. 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.
  11. Durlauf, S.M. & Johnson, P.A., 1995. "Multiple Regimes and Cross-Country Growth Behavior," Working papers, Wisconsin Madison - Social Systems 9419r, Wisconsin Madison - Social Systems.
  12. Carl-Johan, Dalgaard & Henrik, Hansen, 2010. "Evaluating Aid Effectiveness in the Aggregate: A critical assessment of the evidence," MPRA Paper 23026, University Library of Munich, Germany.
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Cited by:
  1. Carl-Johan, Dalgaard & Henrik, Hansen, 2010. "Evaluating Aid Effectiveness in the Aggregate: A critical assessment of the evidence," MPRA Paper 23026, University Library of Munich, Germany.

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