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Does Foreign Aid Contribute to HDI Improvement?

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  • Jordan Signor
  • Julien Vandernoot

Abstract

Foreign aid is aimed at creating a favourable environment capable to foster economic growth and development in poorer countries. Accordingly, recipient countries might rely to a certain extent on external aid to attaint higher welfare levels. In principle, donour’s aid-allocation preference, aided country policies, its institutional background, and economic environment are decisive in the aid effectiveness. Should not the previous conditions be met, could the country fall into the poverty trap. Contrary to a large strand of the literature measuring the role external funding has with regards to its contribution to welfare and growth, we show that Human Development Index is positively driven by internal factors, whilst foreign aid, and private funding have no significant effect. This is coherent with a more recent strand of the literature, suggesting that on average, aid is ineffective in recipient countries. JEL classification numbers: F35, H20, H83, O1.

Suggested Citation

  • Jordan Signor & Julien Vandernoot, 2021. "Does Foreign Aid Contribute to HDI Improvement?," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 11(2), pages 1-2.
    • Handle: RePEc:spt:admaec:v:11:y:2021:i:2:f:11_2_2
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    References listed on IDEAS

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    Cited by:

    1. Browne, Stephen & Matthys, Frederik & Palm, Detlef & Baumann, Max-Otto, 2025. "Beyond aid: A new vision for the UN development function," IDOS Discussion Papers 32/2025, German Institute of Development and Sustainability (IDOS).

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    Keywords

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    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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