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Development Aid and Growth: An association converging to zero

Author

Listed:
  • Hristos Doucouliagos

    (Deakin University, Melbourne, Australia)

  • Martin Paldam

    (School of Economics and Management, Aarhus University, Denmark)

Abstract

This note deals with a paradox: A literature growing exponentially in spite of the fact that it keeps finding the same result. We draw upon the findings of 106 empirical studies, of which 32 appeared in the last 4 years, to examine whether development aid generates economic growth. The studies report aid effects that have been steadily falling over time. The newer studies find a steady continuation of the downward trend. Using meta-regression analysis, we show that total aid has never had an effect on economic growth. Theoretically, this result might be due to simultaneity bias, but the evidence does not support this notion. There is some evidence that some aid components do have a positive effect on growth.

Suggested Citation

  • Hristos Doucouliagos & Martin Paldam, 2009. "Development Aid and Growth: An association converging to zero," Economics Working Papers 2009-17, Department of Economics and Business Economics, Aarhus University.
    • Handle: RePEc:aah:aarhec:2009-17
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    File URL: https://repec.econ.au.dk/repec/afn/wp/09/wp09_17.pdf
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    References listed on IDEAS

    as
    1. Felicitas Nowak-Lehmann D. & Inmaculada Martínez-Zarzoso & Dierk Herzer & Stephan Klasen & Axel Dreher, 2009. "In Search for a Long-run Relationship between Aid and Growth: Pitfalls and Findings," Ibero America Institute for Econ. Research (IAI) Discussion Papers 196, Ibero-America Institute for Economic Research.
    2. De Long, J Bradford & Lang, Kevin, 1992. "Are All Economic Hypotheses False?," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1257-1272, December.
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    Cited by:

    1. Christian Lessmann & Gunther Markwardt, 2010. "Decentralization and Foreign Aid Effectiveness: Do Aid Modality and Federal Design Matter in Poverty Alleviation?," CESifo Working Paper Series 3035, CESifo.

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    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid

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