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Consult your gods: the questionable economics of development assistance in Africa

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  • Asongu, Simplice A

Abstract

This paper assesses the aid-development nexus in 52 African countries using updated data (1996-2010) and a new indicator of human development (adjusted for inequality). The effects of Total Net Official Development Assistance (NODA), NODA from the Development Assistance Committee (DAC) and NODA from Multilateral donors on economic prosperity (at national and per capita levels) are also examined. The findings broadly indicate that development assistance is detrimental to GDP growth, GDP per capita growth and inequality adjusted human development. The magnitude of negativity (which is consistent across specifications and development dynamics) is highest for NODA from Multilateral donors, followed by NODA from DAC countries. Given concerns on the achievement of the MDGs, the relevance of these results point to the deficiency of foreign aid as a sustainable cure to poverty in Africa. Though the stated intents or purposes of aid are socio-economic, the actual impact from the findings negates this. It is a momentous epoque to solve the second tragedy of foreign aid; it is high time economists and policy makers start rethinking the models and theories on which foreign aid is based. In the meantime, it is up to people who care about the poor to hold aid agencies accountable for piecemeal results. Policy implications and caveats are discussed.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 48475.

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Date of creation: 20 Jul 2013
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Handle: RePEc:pra:mprapa:48475

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Keywords: Foreign Aid; Political Economy; Development; Africa;

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  1. Simplice A, Asongu, 2012. "The political economy of development assistance: peril to government quality dynamics in Africa," MPRA Paper 36543, University Library of Munich, Germany.
  2. William Easterly, 2002. "What did Structural Adjustment Adjust? The Association of Policies and Growth with Repeated IMF and World Bank Adjustment Loans," Working Papers 11, Center for Global Development.
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  7. Asongu Simplice, 2011. "Government Quality Determinants of Stock Market Performance in African Countries," Working Papers 11/019, African Governance and Development Institute..
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  25. Fielding, David & McGillivray, Mark & Torres, Sebastian, 2006. "A Wider Approach to Aid Effectiveness: Correlated Impacts on Health, Wealth, Fertility and Education," Working Paper Series RP2006/23, World Institute for Development Economic Research (UNU-WIDER).
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