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Does development aid help poor countries catch up?

Author

Listed:
  • Herbertsson, Tryggvi Thor
  • Martin Paldam

    (Department of Economics, University of Aarhus, Denmark)

Abstract

Aid flows are included into the standard cross-country catch-up relation. Robust¬ness of the result is tested by changing time periods and by adding extra variables. The main results are: Absolute conver¬gence and absolute aid effec¬ti¬ve¬ness are both rejected. While conditional convergence is accepted, conditional aid effecti¬ve¬ness is found to be weak. The two relations are largely inde¬pendent. However, aid has a clear activity effect in the short run. Finally, we try to divide the countries into an A-group where aid is effective and a B-group where it harms. Several criteria of division were explored, but none were very successful – the most satisfactory is the one that divides countries according to their level of development.

Suggested Citation

  • Herbertsson, Tryggvi Thor & Martin Paldam, 2005. "Does development aid help poor countries catch up?," Economics Working Papers 2005-16, Department of Economics and Business Economics, Aarhus University.
    • Handle: RePEc:aah:aarhec:2005-16
    as

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    File URL: https://repec.econ.au.dk/repec/afn/wp/05/wp05_16.pdf
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    References listed on IDEAS

    as
    1. Hristos Doucouliagos & Martin Paldam, 2009. "The Aid Effectiveness Literature: The Sad Results Of 40 Years Of Research," Journal of Economic Surveys, Wiley Blackwell, vol. 23(3), pages 433-461, July.
    2. Francesco Busato & Bruno Chiarini & Enrico Marchetti, 2005. "Fiscal Policy under Indeterminacy and Tax Evasion," Economics Working Papers 2005-09, Department of Economics and Business Economics, Aarhus University.
    3. Hristos Doucouliagos & Martin Paldam, 2005. "Aid Effectiveness on Growth. A Meta Study," Economics Working Papers 2005-13, Department of Economics and Business Economics, Aarhus University.
    4. Hristos Doucouliagos & Martin Paldam, 2006. "Aid Effectiveness on Accumulation: A Meta Study," Kyklos, Wiley Blackwell, vol. 59(2), pages 227-254, May.
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    Cited by:

    1. Hristos Doucouliagos & Martin Paldam, 2010. "Conditional aid effectiveness: A meta-study," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(4), pages 391-410.

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    Keywords

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    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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