Aid and Growth Revisited: Policy, Economic Vulnerability and Political Instability
This paper revisits the relationship between aid and growth, adding new assumptions to the standard Burnside-Dollar model, where aid effectiveness depends only on policy: 1) policy itself depends on aid, which involves a dynamic formulation of the standard model, 2) aid effectiveness (positively) depends on structural economic vulnerability, 3) it depends (negatively) on political instability. An augmented model including these assumptions is estimated on 5-year subperiods from 1965 to 1999 for 59 developing countries, using the Arellano-Bond GMM estimator and new composite indicators of policy, economic vulnerability, political instability. None of the previous assumptions is rejected. It follows that an "efficient" allocation of aid has to consider not only the quality of the present policy, but also its potential improvement, the economic vulnerability faced by the recipient country (more aid needed), and its political instability as well (aid less effective).
|Date of creation:||2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (33-4) 73 17 74 00
Fax: (33-4) 73 17 74 28
Web page: http://cerdi.org/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:cdi:wpaper:451. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vincent Mazenod)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.