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Aid and Growth in Fragile States

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  • McGillivray, Mark
  • Feeny, Simon

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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File URL: http://www.wider.unu.edu/stc/repec/pdfs/rp2008/rp2008-03.pdf
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Bibliographic Info

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

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

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

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References

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Citations

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Cited by:
  1. Simplice A, Asongu & Oasis, Kodila-Tedika, 2013. "State fragility, rent seeking and lobbying: evidence from African data," MPRA Paper 44066, University Library of Munich, Germany.
  2. Graziella Bertocchi & Andrea Guerzoni, 2010. "Growth, History, or Institutions? What Explains State Fragility in Sub-Saharan Africa," Department of Economics 0625, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
  3. Bertocchi, Graziella, 2011. "Growth, Colonization, and Institutional Development: In and Out of Africa," IZA Discussion Papers 5856, Institute for the Study of Labor (IZA).
  4. 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.
  5. World Bank, 2011. "Republic of Burundi - Country Economic Memorandum (CEM) : The Challenge of Achieving Stable and Shared Growth," World Bank Other Operational Studies 2769, The World Bank.
  6. Guillaumont, Patrick, 2008. "An Economic Vulnerability Index: Its Design and Use for International Development Policy," Working Paper Series RP2008/99, World Institute for Development Economic Research (UNU-WIDER).
  7. Tadesse, Tasew, 2011. "Foreign aid and economic growth in Ethiopia," MPRA Paper 33953, University Library of Munich, Germany, revised 20 Sep 2011.

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