Evaluating The Impact Of Foreign Aid On Economic Growth: A Cross-Country Study
One branch of the literature on aid effectiveness attempts to measure the contribution of foreign aid to the growth of developing countries. The micro results are clear and encouraging: foreign aid is beneficial to economic growth. However, until recently, the macro results were inconclusive: the impact of aid on growth was positive, negative, or even non-existent, in statistical terms. This contradiction is known as the ¡°micro-macro paradox¡±. Certain methodological and econometric flaws inherent in the assessments being carried out up to the mid-nineties may provide an explanation for the misleading macro results. Examining a large panel data set, I have found that foreign aid has had a positive impact on economic growth. In light of these findings, I conclude that earlier-generation work is in accordance with the new and recent generation of aid effectiveness studies. Thus, less importance should be attributed to the ¡°micro-macro paradox¡± as an overall appraisal of aid effectiveness. In terms of magnitude, I have also found that aid has less effect on growth in the short-run than in the long-run. I also conclude that the time lags in the aid-growth relationship should not be ignored.
Volume (Year): 30 (2005)
Issue (Month): 2 (December)
|Contact details of provider:|| Web page: http://www.jed.or.kr/|
More information through EDIRC
References listed on IDEAS
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.:
- Patrick GUILLAUMONT & Lisa CHAUVET, 1999.
"Aid and Performance: A Reassessment,"
- Lisa CHAUVET & Patrick GUILLAUMONT, 2003. "Aid and Growth Revisited: Policy, Economic Vulnerability and Political Instability," Working Papers 200327, CERDI.
- R. Lensink & H. White, 2001. "Are There Negative Returns to Aid?," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 42-65.
- Tarp, Finn, 2006.
"Aid and Development,"
13171, University Library of Munich, Germany.
- Dalgaard, Carl-Johan & Hansen, Henrik & Tarp, Finn, 2002.
"On the Empirics of Foreign Aid and Growth,"
63696, University Library of Munich, Germany.
- 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.
- Hansen, Henrik & Tarp, Finn, 2000.
"Aid and Growth Regressions,"
62288, University Library of Munich, Germany.
- Mosley, Paul & Hudson, John & Horrell, Sara, 1987. "Aid, the Public Sector and the Market in Less Developed Countries," Economic Journal, Royal Economic Society, vol. 97(387), pages 616-41, September.
When requesting a correction, please mention this item's handle: RePEc:jed:journl:v:30:y:2005:i:2:p:25-48. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Changhui Kang)
If references are entirely missing, you can add them using this form.