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Spatial aid spillovers during transition

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  • Askarov, Zohid
  • Doucouliagos, Hristos

Abstract

We investigate whether development aid stimulates growth in transition economies, paying particular attention to the possibility of spatial spillovers arising from aid. We find that common borders and a shared historical and political heritage result in a complex set of associations between aid and growth. Aid has a positive impact on growth in the recipient country. However, the impact of aid also spills over to affect other nations. Aid appears to create positive spillovers through improved total factor productivity and possibly currency appreciation. At the same time, aid depletes human capital through emigration and it particularly adversely affects democracy and governance quality in other transition economies. On balance, aid generates net adverse growth spillovers in transition economies.
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Suggested Citation

  • Askarov, Zohid & Doucouliagos, Hristos, 2015. "Spatial aid spillovers during transition," Working Papers eco_2015_1, Deakin University, Department of Economics.
  • Handle: RePEc:dkn:econwp:eco_2015_1
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    File URL: http://www.dx.doi.org/10.1016/j.ejpoleco.2015.10.005
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    More about this item

    Keywords

    aid effectiveness; spatial spillovers; transition economies;

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • F35 - International Economics - - International Finance - - - Foreign Aid

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