The Effects of Foreign Aid in Sub-Saharan Africa
AbstractThis paper contributes to the aid effectiveness debate by applying a vector autore- gression model to a panel of Sub-Saharan African countries. This method avoids the need for instrumental variables and allows one to analyse the impact of foreign aid on human development and on economic development simultaneously. The full sample results indicate a small increase in economic growth following a fairly substantial aid shock. The size of the effect puts the result somewhere between the arguments of aid optimists and those of aid pessimists. Economic growth is found to respond more to aid shocks in groups defined by better economic policies, poor institutions and high aid dependence. Human development, for which I use the growth rate of life expectancy as a proxy, responds positively to aid shocks in democracies and in good institutional environments.
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Bibliographic InfoPaper provided by School Of Economics, University College Dublin in its series Working Papers with number 201116.
Length: 31 pages
Date of creation: 23 Aug 2011
Date of revision:
Foreign Aid; Economic Growth; Human Development; Panel VAR;
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