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Aid and Growth in Small Island Developing States


  • Simon Feeny
  • Mark McGillivray


Aid flows to small island developing states (SIDS) are enormous by international standards when compared to the size of their economies. Yet these countries face many severe economic challenges and many have experienced declines in the living standards of their citizens. This paper looks at the impact of aid on what is treated as a necessary precondition for improvements in living standards, typically defined. Specifically, it examines the impact of foreign aid on real per capita income growth in SIDS by econometrically analysing cross-country data for the period 1980 to 2004. A variety of econometric techniques and measures of aid are used. Results suggest that foreign aid is effective at spurring economic growth but with diminishing returns.

Suggested Citation

  • Simon Feeny & Mark McGillivray, 2010. "Aid and Growth in Small Island Developing States," Journal of Development Studies, Taylor & Francis Journals, vol. 46(5), pages 897-917.
  • Handle: RePEc:taf:jdevst:v:46:y:2010:i:5:p:897-917
    DOI: 10.1080/00220381003623889

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    References listed on IDEAS

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    Cited by:

    1. Qayyum, Unbreen & Din, Musleh-ud & Haider, Adnan, 2014. "Foreign aid, external debt and governance," Economic Modelling, Elsevier, vol. 37(C), pages 41-52.
    2. Unbreen Qayyum, 2013. "Institutional Quality, Conflict and Aid Dependency," PIDE-Working Papers 2013:94, Pakistan Institute of Development Economics.
    3. Bandyopadhyay, Subhayu & Lahiri, Sajal & Younas, Javed, 2015. "Financing growth through foreign aid and private foreign loans: Nonlinearities and complementarities," Journal of International Money and Finance, Elsevier, vol. 56(C), pages 75-96.
    4. Feeny, Simon & Iamsiraroj, Sasi & McGillivray, Mark, 2014. "Growth and Foreign Direct Investment in the Pacific Island countries," Economic Modelling, Elsevier, vol. 37(C), pages 332-339.
    5. Bah, El-hadj M. & Ward, Jeremy, 2011. "Effectiveness of foreign aid in Small Island Developing States," MPRA Paper 32062, University Library of Munich, Germany.
    6. Feeny, Simon & de Silva, Ashton, 2012. "Measuring absorptive capacity constraints to foreign aid," Economic Modelling, Elsevier, vol. 29(3), pages 725-733.
    7. Angeon, Valérie & Bates, Samuel, 2015. "Reviewing Composite Vulnerability and Resilience Indexes: A Sustainable Approach and Application," World Development, Elsevier, vol. 72(C), pages 140-162.

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