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Aid-Dependency and Attributes of an Aid-Exit Strategy


  • Admasu Shiferaw

    (Georg-August-University Göttingen)

  • Degol Hailu



This paper tracks a group of developing countries which started off in the 1960s with a comparable and relatively high aid dependency but followed two different paths in the subsequent four decades: where one sub-group of countries became increasingly aid dependent while the other sub-group nearly exited aid-dependency. It then compares the trajectories of key macroeconomic variables in the two groups of countries in a bid to provide broad sketches of an aid-exit strategy. The paper shows that the likelihood of exiting aid dependency increases with the rate of investment and the share of manufacturing in GDP while it declines with the size of the saving-investment gap and the rate of inflation.

Suggested Citation

  • Admasu Shiferaw & Degol Hailu, 2010. "Aid-Dependency and Attributes of an Aid-Exit Strategy," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 57, Courant Research Centre PEG.
  • Handle: RePEc:got:gotcrc:057

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    References listed on IDEAS

    1. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1203-1250.
    2. Acemoglu, Daron, 2003. "Why not a political Coase theorem? Social conflict, commitment, and politics," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 620-652, December.
    3. Thierry Verdier & Daron Acemoglu, 2000. "The Choice between Market Failures and Corruption," American Economic Review, American Economic Association, vol. 90(1), pages 194-211, March.
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    More about this item


    Aid Dependency; Aid Exit; Investment; Domestic Saving; Inflation;

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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