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Foreign aid and growth

  • Mehmet Eris

    ()

    (Organisation for Economic Co-operation and Development)

Registered author(s):

    Burnside and Dollar (2000) (BD) ignite a policy debate by claiming that foreign aid works only in good policy environments. This result, however, has been criticized by a number of studies on numerous statistical grounds concluding that the BD result is too fragile. I revisit the aid-growth relationship using Bayesian Model Averaging techniques to account for uncertainty issues regarding model specification. I find that the data evidence does not support the claim that aid works only in good policy environments. My analysis also suggests that aid flows are not very effective in boosting growth regardless of the quality of the policy environment.

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    File URL: http://www.accessecon.com/pubs/EB/2008/Volume15/EB-08O10017A.pdf
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    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 15 (2008)
    Issue (Month): 14 ()
    Pages: 1-14

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    Handle: RePEc:ebl:ecbull:eb-08o10017
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    1. Collier, Paul & Dollar, David, 1999. "Aid allocation and poverty reduction," Policy Research Working Paper Series 2041, The World Bank.
    2. 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.
    3. Nehru, Vikram & Swanson, Eric & Dubey, Ashutosh, 1995. "A new database on human capital stock in developing and industrial countries: Sources, methodology, and results," Journal of Development Economics, Elsevier, vol. 46(2), pages 379-401, April.
    4. Lensink, Robert & White, Howard, 1999. "Are there negative returns to aid?," Research Report 99E60, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    5. Easterly, William & Levine, Ross, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1203-50, November.
    6. William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
    7. Lu, Shuang & Ram , Rati, 2001. "Foreign Aid, Government Policies, and Economic Growth: Further Evidence from Cross-Country Panel Data for 1970-1993," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 54(1), pages 15-29.
    8. Patrick GUILLAUMONT & Lisa CHAUVET, 1999. "Aid and Performance: A Reassessment," Working Papers 199910, CERDI.
    9. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
    10. Bacha, Edmar L., 1990. "A three-gap model of foreign transfers and the GDP growth rate in developing countries," Journal of Development Economics, Elsevier, vol. 32(2), pages 279-296, April.
    11. Jeff Dayton-Johnson & John Hoddinott, 2003. "Aid, policies and growth, redux," Department of Economics at Dalhousie University working papers archive redux2, Dalhousie, Department of Economics.
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