Advanced Search
MyIDEAS: Login

Foreign Aid and Foreign Policy: How donors undermine the effectiveness of overseas development assistance

Contents:

Author Info

Abstract

Previous aid effectiveness studies have typically attempted to identify recipient-side conditions of aid effectiveness � such as �good policies�, political and economic stability, and �tropical effects� � using cross-country growth regressions. An obvious omission from this list of conditions is the extent by which donors are concerned with achieving geopolitical rather than developmental objectives, which may reduce aid effectiveness insofar as strategic donors have less incentive to hold the recipient government accountable for the developmentally effective use of aid receipts. Aid allocation regressions can (and are) used to demonstrate the importance of geopolitical considerations, but the author also shows that such regressions cannot be used to instrument for aid in a second stage growth regression, as is standard practice in this literature, because to do so would invoke the untested assumption that strategically motivated aid is just as effective as developmentally motivated aid. Instead the author tests the effect of lagged aid flows on growth, and subsequently demonstrates that: aggregate aid flows are estimated to have significant but moderately sized effects on growth; multilateral aid flows have roughly twice the effect of bilateral flows; but that the lower average effects of bilateral aid nevertheless obscure a substantial degree of heterogeneity in the bilateral aid coefficient which is again explained by the degree to which these flows are indeed strategically motivated.

Download Info

If 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.
File URL: http://www.uq.edu.au/economics/cepa/docs/WP/WP052005.pdf
Download Restriction: no

Bibliographic Info

Paper provided by School of Economics, University of Queensland, Australia in its series CEPA Working Papers Series with number WP052005.

as in new window
Length:
Date of creation: 2005
Date of revision:
Handle: RePEc:qld:uqcepa:15

Contact details of provider:
Postal: St. Lucia, Qld. 4072
Phone: +61 7 3365 6570
Fax: +61 7 3365 7299
Email:
Web page: http://www.uq.edu.au/economics/
More information through EDIRC

Related research

Keywords:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Alesina, Alberto & Dollar, David, 2000. " Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March.
  2. C-J. Dalgaard & H. Hansen, 2001. "On Aid, Growth and Good Policies," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 17-41.
  3. Gulati, Umesh C, 1978. "Effect of Capital Imports on Savings and Growth in Less Developed Countries," Economic Inquiry, Western Economic Association International, vol. 16(4), pages 563-69, October.
  4. Burnside, Craig & Dollar, David, 1997. "Aid, policies, and growth," Policy Research Working Paper Series 1777, The World Bank.
  5. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September.
  6. P. Guillaumont & L. Chauvet, 2001. "Aid and Performance: A Reassessment," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 66-92.
  7. Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2004. "On The Empirics of Foreign Aid and Growth," Economic Journal, Royal Economic Society, vol. 114(496), pages F191-F216, 06.
  8. David Roodman, 2004. "The Anarchy of Numbers: Aid, Development, and Cross-country Empirics," Development and Comp Systems 0412003, EconWPA.
  9. Rati Ram, 2003. "Roles of Bilateral and Multilateral Aid in Economic Growth of Developing Countries," Kyklos, Wiley Blackwell, vol. 56(1), pages 95-110, February.
  10. Collier, Paul & Hoeffler, Anke, 2004. "Aid, policy and growth in post-conflict societies," European Economic Review, Elsevier, vol. 48(5), pages 1125-1145, October.
  11. Dani Rodrick, 2003. "Growth Strategies," Economics working papers 2003-17, Department of Economics, Johannes Kepler University Linz, Austria.
  12. Michael A. Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting chickens when they hatch: The short-term effect of aid on growth," International Finance 0407010, EconWPA.
  13. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  14. 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.
  15. Lisa CHAUVET & Patrick GUILLAUMONT, 2003. "Aid and Growth Revisited: Policy, Economic Vulnerability and Political Instability," Working Papers 200327, CERDI.
  16. Tavares, Jose, 2003. "Does foreign aid corrupt?," Economics Letters, Elsevier, vol. 79(1), pages 99-106, April.
  17. Derek D. Headey & Professor Christopher O`Donnell & D.S. Prasada Rao & Alan Duhs, 2004. "All the Conditions of Effective Foreign Aid," CEPA Working Papers Series WP082004, School of Economics, University of Queensland, Australia.
  18. John Hudson & Paul Mosley, 2001. "Aid policies and growth: in search of the holy grail," Journal of International Development, John Wiley & Sons, Ltd., vol. 13(7), pages 1023-1038.
  19. 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..
  20. Henrik Hansen & Finn Tarp, 2000. "Aid effectiveness disputed," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 375-398.
  21. Lensink, Robert & White, Howard, 1999. "Are there negative returns to aid?," Research Report 99E60, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  22. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April.
  23. Collier, Paul & Dehn, Jan, 2001. "Aid, shocks, and growth," Policy Research Working Paper Series 2688, The World Bank.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Sanjay Reddy & Camelia Minoiu, 2009. "Development Aid and Economic Growth: A Positive Long-Run Relation," IMF Working Papers 09/118, International Monetary Fund.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:qld:uqcepa:15. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Randal Anderson).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.