Can the new aid-growth models be replicated
The recent literature on the aid-growth relation discusses two competing models: The Good Policy Model, where the key feature is policy times aid, and the Medicine Model, where the key feature is aid squared. Both have been reached on a sample of about 1/3 of the available data. We present a base model, to replicate both models on that data set. It is then replicated on as much of the available data as possible. Within the sample the Good Policy Model proves fragile, while the Medicine Model is more robust. Neither model replicates outside the original data sample. Further, we apply a semi-parametric regression technique to test for an unknown functional form of the aid-growth relation. It rejects that aid is statistically significant. Thus the evidence in favor of an aid-growth relationship - let alone a nonlinear one - is weak.
References listed on IDEAS
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- Hansen, Henrik & Tarp, Finn, 1999. "Aid Effectiveness Disputed," MPRA Paper 62290, University Library of Munich, Germany.
- C-J. Dalgaard & H. Hansen, 2001. "On Aid, Growth and Good Policies," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 17-41.
- Charles C. Chang & Eduardo Fernández-Arias & Luis Serven, 1998.
"Measuring Aid Flows: A New Approach,"
Research Department Publications
4146, Inter-American Development Bank, Research Department.
- Chang, Charles C. & Fernandez-Arias, Eduardo & Serven, Luis, 1999. "Measuring aid flows : a new approach," Policy Research Working Paper Series 2050, The World Bank.
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- R. Lensink & H. White, 2001. "Are There Negative Returns to Aid?," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 42-65.
- Lensink, Robert & White, Howard, 1999. "Are there negative returns to aid?," Research Report 99E60, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
- Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
- Henrik Hansen & Finn Tarp, 2000. "Aid effectiveness disputed," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 375-398. Full references (including those not matched with items on IDEAS)