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Foreign Aid, Donor Fragmentation, and Economic Growth

  • Annen Kurt

    ()

    (University of Guelph)

  • Kosempel Stephen

    ()

    (University of Guelph)

This paper analyzes the impact of foreign aid on growth. It differs from the existing literature in at least two important ways. First, we differentiate between foreign aid as technical assistance and non-technical assistance, and demonstrate both theoretically and empirically that this distinction is important. Second, we test the hypothesis that the effectiveness of aid depends on its level of fragmentation. To preview our main results: non-technical assistance has no statistically significant impact on growth; but technical assistance has a positive and significant impact, except in countries where it is highly fragmented.

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File URL: http://www.degruyter.com/view/j/bejm.2009.9.1/bejm.2009.9.1.1863/bejm.2009.9.1.1863.xml?format=INT
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Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 9 (2009)
Issue (Month): 1 (August)
Pages: 1-32

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Handle: RePEc:bpj:bejmac:v:9:y:2009:i:1:n:33
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  1. Chatterjee, Santanu & Giuliano, Paola & Kaya, Ilker, 2007. "Where Has All the Money Gone? Foreign Aid and the Quest for Growth," IZA Discussion Papers 2858, Institute for the Study of Labor (IZA).
  2. Sanjay Reddy & Camelia Minoiu, 2009. "Development Aid and Economic Growth; A Positive Long-Run Relation," IMF Working Papers 09/118, International Monetary Fund.
  3. Ben R. Craig & William E. Jackson & James B. Thomson, 2004. "On SBA-guaranteed lending and economic growth," Working Paper 0403, Federal Reserve Bank of Cleveland.
  4. Agénor, Pierre-Richard & Bayraktar, Nihal & El Aynaoui, Karim, 2008. "Roads out of poverty? Assessing the links between aid, public investment, growth, and poverty reduction," Journal of Development Economics, Elsevier, vol. 86(2), pages 277-295, June.
  5. William Easterly & Ross Levine & David Roodman, 2004. "Aid, Policies, and Growth: Comment," American Economic Review, American Economic Association, vol. 94(3), pages 774-780, June.
  6. J. Atsu Amegashie & Bazoumana Ouattara & Eric Strobl, 2007. "Moral Hazard and the Composition of Transfers: Theory with an Application to Foreign Aid," CESifo Working Paper Series 1996, CESifo Group Munich.
  7. 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.
  8. repec:kap:iaecre:v:10:y:2004:i:4:p:257-264 is not listed on IDEAS
  9. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
  10. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  11. Knack,Stephen & Rahman, Aminur, 2004. "Donor fragmentation and bureaucratic quality in aid recipients," Policy Research Working Paper Series 3186, The World Bank.
  12. William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
  13. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
  14. Burnside, Craig & Dollar, David, 1997. "Aid, policies, and growth," Policy Research Working Paper Series 1777, The World Bank.
  15. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
  16. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  17. Roland Hodler, 2007. "Rent seeking and aid effectiveness," International Tax and Public Finance, Springer, vol. 14(5), pages 525-541, October.
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