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Regime changes, economic policies and the effect of aid on growth

  • Muhammed Islam
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    This study finds that on average aid has little impact on economic growth, although a robust finding is that aid promotes growth only in a politically stable environment irrespective of the quality of the country's economic policies. Aid is ineffective in an unstable environment even in the presence of good policies. The results, however, indicate that policy is more effective in promoting growth when supported by increased aid flows rather than aid being more effective in good policy environment. The empirical results also provide some tentative support for the presence of an aid Laffer curve in the politically stable countries. The allocation of aid is found to be influenced by the country size and its state of development, rather than the quality of policy.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/00220380500187828
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    Article provided by Taylor & Francis Journals in its journal Journal of Development Studies.

    Volume (Year): 41 (2005)
    Issue (Month): 8 ()
    Pages: 1467-1492

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    Handle: RePEc:taf:jdevst:v:41:y:2005:i:8:p:1467-1492
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    1. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April.
    2. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
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    5. Barro, Robert J, 2000. " Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
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    7. Patrick GUILLAUMONT & Lisa CHAUVET, 1999. "Aid and Performance: A Reassessment," Working Papers 199910, CERDI.
    8. Burnside, Craig & Dollar, David, 1997. "Aid, policies, and growth," Policy Research Working Paper Series 1777, The World Bank.
    9. R. Lensink & H. White, 2001. "Are There Negative Returns to Aid?," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 42-65.
    10. Hansen, Henrik & Tarp, Finn, 1999. "Aid Effectiveness Disputed," MPRA Paper 62290, University Library of Munich, Germany.
    11. Alesina, Alberto & Dollar, David, 2000. " Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March.
    12. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
    13. Muhammed N. Islam & Stanley L. Winer, 2004. "Tinpots, Totalitarians (and Democrats): An Empirical Investigation of the Effects of Economic Growth on Civil Liberties and Political Rights," Public Choice, Springer, vol. 118(3_4), pages 289-323, 03.
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