Reversed Economics and Inhumanity of Development Assistance in Africa
Purpose – The purpose of this paper is to assess the aid-development nexus in 52 African countries using updated data (1996-2010) and a new indicator of human development(adjusted for inequality). Design/methodology/approach – The estimation technique used is a Two-Stage-Least Squares Instrumental Variable approach. Instruments include: income-levels, legal-origins and religious-dominations. The first-step consists of justifying the choice of the estimation technique with a Hausman-test for endogeneity. In the second-step, we verify that the instrumental variables are exogenous to the endogenous components of explaining variables(aid dynamic channels) conditional on other covariates(control variables). In the third-step, the strength and validity of the instruments are examined with the Cragg-Donald and Sargan overidentifying restrictions tests respectively. Robustness checks are ensured by: (1) the use of alternative aid indicators; (2) estimation under restricted and unrestricted hypotheses ; and (3) adoption of two interchangeable sets of instruments. Findings – The findings broadly indicate that development assistance is detrimental to GDP growth, GDP per capita growth and inequality adjusted human development. Given concerns on the achievement of the MDGs, the relevance of these results point to the deficiency of foreign aid as a sustainable cure to poverty in Africa. Social implications – It is a momentous epoque to solve the second tragedy of foreign aid; it is high time economists and policy makers start rethinking the models and theories on which foreign aid is based. In the meantime, it is up to people who care about the poor to hold aid agencies accountable for piecemeal results. Originality/value – These findings are based on data collected after pioneering works on the aid-development nexus. Usage of the inequality adjusted human development index first published in 2010, corrects past works of the bunch of criticisms inherent in the first index.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul Mosley & John Hudson & Sara Horrell, 1992. "Aid, the public sector and the market in less developed countries: A return to the scene of the crime," Journal of International Development, John Wiley & Sons, Ltd., vol. 4(2), pages 139-150, 03.
- Mosley, Paul & Hudson, John & Horrell, Sara, 1987. "Aid, the Public Sector and the Market in Less Developed Countries," Economic Journal, Royal Economic Society, vol. 97(387), pages 616-641, September.
- Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989.
"Industrialization and the Big Push,"
Journal of Political Economy,
University of Chicago Press, vol. 97(5), pages 1003-1026, October.
- Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1988. "Industrialization and the Big Push," NBER Working Papers 2708, National Bureau of Economic Research, Inc.
- Murphy, Kevin M. & Shleifer, Andrei & Vishny, Robert W., 1989. "Industrialization and the Big Push," Scholarly Articles 3606235, Harvard University Department of Economics.
- Svensson, Jakob, 2000. "Foreign aid and rent-seeking," Journal of International Economics, Elsevier, vol. 51(2), pages 437-461, August.
- Svensson, Jakob, 1998. "Foreign aid and rent-seeking," Policy Research Working Paper Series 1880, The World Bank.
- P. Guillaumont & L. Chauvet, 2001. "Aid and Performance: A Reassessment," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 66-92.
- Patrick GUILLAUMONT & Lisa CHAUVET, 1999. "Aid and Performance: A Reassessment," Working Papers 199910, CERDI.
- René M. Stulz, 1999. "Golbalization, Corporate Finance, And The Cost Of Capital," Journal of Applied Corporate Finance, Morgan Stanley, vol. 12(3), pages 8-25.
- Pritchett, Lant & Woolcock, Michael, 2004. "Solutions When the Solution is the Problem: Arraying the Disarray in Development," World Development, Elsevier, vol. 32(2), pages 191-212, February.
- Simplice A., Asongu, 2011. "Law, Finance and Investment: does legal origin matter?," MPRA Paper 34698, University Library of Munich, Germany.
- Simplice A. ASONGU, 2011. "Why Do French Civil–Law Countries Have Higher Levels Of Financial Efficiency?," Journal of Advanced Research in Law and Economics, ASERS Publishing, vol. 0(2), pages 94-108, December.
- Simplice A., Simplice, 2011. "Why do French civil-law countries have higher levels of financial efficiency?," MPRA Paper 33950, University Library of Munich, Germany.
- Asongu Simplice, 2011. "Why do French civil-law countries have higher levels of financial efficiency?," Working Papers 11/011, African Governance and Development Institute..
- Fielding, David & McGillivray, Mark & Torres, Sebastian, 2006. "A Wider Approach to Aid Effectiveness: Correlated Impacts on Health, Wealth, Fertility and Education," WIDER Working Paper Series 023, World Institute for Development Economic Research (UNU-WIDER).
- Easterly, William, 1999. "The ghost of financing gap: testing the growth model used in the international financial institutions," Journal of Development Economics, Elsevier, vol. 60(2), pages 423-438, December.
- J.A. Agbor & J. W. Fedderke & N. Viegi, 2010. "How Does Colonial Origin Matter for Economic Performance in sub-Saharan Africa?," Working Papers 176, Economic Research Southern Africa.
- Julius A. Agbor, 2011. "How Does Colonial Origin Matter for Economic Performance in Sub-Saharan Africa?," WIDER Working Paper Series 027, World Institute for Development Economic Research (UNU-WIDER).
- Simplice A. Asongu, 2012. "Law and Finance in Africa," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 55(4), pages 385-408.
- William Easterly & Ross Levine & David Roodman, 2003. "New Data, New doubts: A Comment on Burnside and Dollar's "Aid, Policies, and Growth" (2000)," NBER Working Papers 9846, National Bureau of Economic Research, Inc.
- Tony Addison & George Mavrotas & Mark McGillivray, 2005. "Development assistance and development finance: evidence and global policy agendas," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(6), pages 819-836.
- Addison, Tony & Mavrotas, George & McGillivray, Mark, 2005. "Development Assistance and Development Finance: Evidence and Global Policy Agendas," WIDER Working Paper Series 023, World Institute for Development Economic Research (UNU-WIDER).
- Michael A. Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting chickens when they hatch: The short-term effect of aid on growth," International Finance 0407010, EconWPA.
- Michael Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting Chickens When They Hatch: The Short-term Effect of Aid on Growth," Working Papers 44, Center for Global Development.
- Filmer, Deon & Hammer, Jeffrey S & Pritchett, Lant H, 2000. "Weak Links in the Chain: A Diagnosis of Health Policy in Poor Countries," World Bank Research Observer, World Bank Group, vol. 15(2), pages 199-224, August.
- Easterly, William, 2005. "What did structural adjustment adjust?: The association of policies and growth with repeated IMF and World Bank adjustment loans," Journal of Development Economics, Elsevier, vol. 76(1), pages 1-22, February.
- William Easterly, 2002. "What did Structural Adjustment Adjust? The Association of Policies and Growth with Repeated IMF and World Bank Adjustment Loans," Working Papers 11, Center for Global Development.
- Stephen Knack, 2001. "Aid Dependence and the Quality of Governance: Cross-Country Empirical Tests," Southern Economic Journal, Southern Economic Association, vol. 68(2), pages 310-329, October. Full references (including those not matched with items on IDEAS)