IDEAS home Printed from https://ideas.repec.org/p/adv/wpaper/200503.html

To aid or not to aid: Foreign aid and productivity in cross-country regressions

Author

Listed:
  • Pablo Selaya

    (University of Copenhagen)

Abstract

The paper reexamines empirically the robustness of competing theories of foreign aid effectiveness. By shifting the focus from the effects of aid on income to effects of aid on productivity, it is possible to put to test 3 existing theories of foreign aid effectiveness. The results provide support for the hypotheses that (i) aid has a positive effect in fostering growth of average productivity, (ii) aid doesn't operate with diminishing returns, and (iii) the magnitude of the total effect depends on climate-related circumstances. The results support the policy recommendation previously made in the literature to seriously reconsider the conditionality rule for foreign aid disbursements.

Suggested Citation

  • Pablo Selaya, 2005. "To aid or not to aid: Foreign aid and productivity in cross-country regressions," Development Research Working Paper Series 03/2005, Institute for Advanced Development Studies.
    • Handle: RePEc:adv:wpaper:200503
    as

    Download full text from publisher

    File URL: http://www.inesad.edu.bo/pdf/wp03_2005.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Raghuram G. Rajan & Arvind Subramanian, 2008. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 643-665, November.
    2. 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.
    3. John Shea, 1997. "Instrument Relevance in Multivariate Linear Models: A Simple Measure," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 348-352, May.
    4. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    5. Jones, Charles I, 1997. "Convergence Revisited," Journal of Economic Growth, Springer, vol. 2(2), pages 131-153, July.
    6. Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2004. "On The Empirics of Foreign Aid and Growth," Economic Journal, Royal Economic Society, vol. 114(496), pages 191-216, June.
    7. Durlauf, Steven N. & Johnson, Paul A. & Temple, Jonathan R.W., 2005. "Growth Econometrics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.),Handbook of Economic Growth, edition 1, volume 1, chapter 8, pages 555-677, Elsevier.
    8. Hall, Alastair R & Rudebusch, Glenn D & Wilcox, David W, 1996. "Judging Instrument Relevance in Instrumental Variables Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 283-298, May.
    9. Burnside, Craig & Dollar, David, 2004. "Aid, policies, and growth : revisiting the evidence," Policy Research Working Paper Series 3251, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Muhammad Nayaz & Javed Husain, 2013. "Pakistan’s Monetary Aid Concerns," South Asian Journal of Management Sciences (SAJMS), Iqra University, Iqra University, vol. 7(1), pages 31-34, Spring.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Xin Geng & Carlos Martins-Filho & Feng Yao, 2015. "Estimation of a Partially Linear Regression in Triangular Systems," Working Papers 15-46, Department of Economics, West Virginia University.
    2. Dierk Herzer & Oliver Morrissey, 2009. "The Long-Run Effect of Aid on Domestic Output," Discussion Papers 09/01, University of Nottingham, CREDIT.
    3. Nuruddeen USMAN & Martins.O. APINRAN, 2019. "The Impact of Aid and Macroeconomic Policy on Growth in Nigeria: A Bounds Testing Approach," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(5), pages 581-603, May.
    4. Abdur Chowdhury & Paolo Garonna, 2007. "Effective Foreign Aid, Economic Integration and Subsidiarity: Lessons from Europe," ECE Discussion Papers Series 2007_2, UNECE.
    5. Temple, Jonathan R.W., 2010. "Aid and Conditionality," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4415-4523, Elsevier.
    6. Feeny, Simon & de Silva, Ashton, 2012. "Measuring absorptive capacity constraints to foreign aid," Economic Modelling, Elsevier, vol. 29(3), pages 725-733.
    7. Eskander Alvi & Debasri Mukherjee & Elias Kedir Shukralla, 2008. "Aid, Policies, and Growth in Developing Countries: A New Look at the Empirics," Southern Economic Journal, John Wiley & Sons, vol. 74(3), pages 693-706, January.
    8. Almuth Scholl, 2018. "Debt Relief for Poor Countries: Conditionality and Effectiveness," Economica, London School of Economics and Political Science, vol. 85(339), pages 626-648, July.
    9. Dierk Herzer & Michael Grimm, 2012. "Does foreign aid increase private investment? Evidence from panel cointegration," Applied Economics, Taylor & Francis Journals, vol. 44(20), pages 2537-2550, July.
    10. Vlad Pavlov & Craig Sugden, 2006. "Aid and Growth in the Pacific Islands," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 20(2), pages 38-55, November.
    11. Simon Feeny & Paul Hansen & Stephen Knowles & Mark McGillivray & Franz Ombler, 2019. "Donor motives, public preferences and the allocation of UK foreign aid: a discrete choice experiment approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(3), pages 511-537, August.
    12. Juergen Bitzer & Erkan Goeren, 2018. "Foreign Aid and Subnational Development: A Grid Cell Analysis," Working Papers V-407-18, University of Oldenburg, Department of Economics, revised Mar 2018.
    13. Carl-Johan Dalgaard & Ola Olsson, 0. "Windfall Gains, Political Economy and Economic Development," Journal of African Economies, Centre for the Study of African Economies, vol. 17(suppl_1), pages -109.
    14. Museru, Malimu & Toerien, Francois & Gossel, Sean, 2014. "The Impact of Aid and Public Investment Volatility on Economic Growth in Sub-Saharan Africa," World Development, Elsevier, vol. 57(C), pages 138-147.
    15. Kasuga, Hidefumi & Morita, Yuichi, 2012. "Aid effectiveness, governance and public investment," Economic Modelling, Elsevier, vol. 29(2), pages 514-521.
    16. Douch, Mustapha & Edwards, Huw & Landman, Todd & Mallick, Sushanta, 2022. "Aid effectiveness: Human rights as a conditionality measure," World Development, Elsevier, vol. 158(C).
    17. Agénor, Pierre-Richard & Bayraktar, Nihal & El Aynaoui, Karim, 2008. "Roads out of poverty? Assessing the links between aid, public investment, growth, and poverty reduction," Journal of Development Economics, Elsevier, vol. 86(2), pages 277-295, June.
    18. Ziyoda Asatullaeva & Reza Fathollah Zadeh Aghdam & Nisar Ahmad & Laylo Tashpulatova, 2021. "The impact of foreign aid on economic development: A systematic literature review and content analysis of the top 50 most influential papers," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(4), pages 717-751, May.
    19. Patrick GUILLAUMONT, 2009. "Aid effectiveness for poverty reduction: macroeconomic overview and emerging issues," Working Papers P05, FERDI.
    20. Bazoumana Ouattara & Eric Strobl, 2008. "Aid, Policy and Growth: Does Aid Modality Matter?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(2), pages 347-365, July.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:adv:wpaper:200503. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lykke Andersen (email available below). General contact details of provider: https://edirc.repec.org/data/inesabo.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.