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Aid and Growth in Fragile States

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Author Info
McGillivray, Mark
Feeny, Simon

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Abstract

The literature on aid has come a long way in recent years, and as a result we now know much more about aid effectiveness than possibly ever before. But significant gaps in knowledge remain. One such gap is the effectiveness of aid in the so-called ?fragile states?, countries with critically low policy and institutional performance ratings. The current paper addresses this void by examining possible links between aid and economic growth in fragile states. It finds that: (i) growth would have been 1.4 percentage points lower in highly fragile states in the absence of aid to them, compared to 2.5 percentage points in other countries; (ii) highly fragile states from a per capita income growth perspective can only efficiently absorb approximately one-third of the amounts of aid that other countries can, and; (iii) while from the same perspective most fragile states are under-aided, to the extent that they could efficiently absorb greater amounts of aid than they currently receive, many of the highly fragile states are substantially over-aided in this sense. The overall conclusion is that donors need to look very closely at their aid to the sub-set of fragile states deemed in this paper as highly fragile.

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Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Papers with number RP2008/03.

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Length: 22 pages
Date of creation: 2008
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Handle: RePEc:unu:wpaper:rp2008-03

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Keywords: foreign aid; economic growth; fragile states; policies; absorptive capacity;

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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.:
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  3. Voivodas, Constantin S., 1973. "Exports, foreign capital inflow and economic growth," Journal of International Economics, Elsevier, vol. 3(4), pages 337-349, November. [Downloadable!] (restricted)
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  6. Branchflower, Andrew & Hennell, Sarah & Pongracz, Sophie & Smart, Malcolm, 2004. "How Important Are Difficult Environments To Achieving The Mdgs?," PRDE Working Papers 12821, Department for International Development (DFID) (UK). [Downloadable!]
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  27. 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. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Simon Feeny & Mark McGillivray, 2009. "Aid allocation to fragile states: Absorptive capacity constraints," Journal of International Development, John Wiley & Sons, Ltd., vol. 21(5), pages 618-632. [Downloadable!]
  2. Guillaumont, Patrick, 2008. "An Economic Vulnerability Index: Its Design and Use for International Development Policy," Working Papers RP2008/99, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
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