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Are there negative returns to aid?

Listed author(s):
  • Lensink, Robert
  • White, Howard

    (Groningen University)

The World Bank report Assessing Aid assumes that aid is more effective when it is given to countries where polices are sound. Moreover, it assumes that an inflow of aid, above a certain level, starts to have negative effects. In this paper we empirically test both assumptions. We do not find evidence for the fact that aid becomes more effective when it is given to countries with good policies. On the other hand, we find some evidence for negative returns to aid at high levels of aid inflows. However, the results are sensitive to the countries considered as well as the exact specification. Moreover, the turning point above which aid starts to have a negative effect on growth seems to be much higher than assumed in the background calculations for Assessing Aid.

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File URL: http://irs.ub.rug.nl/ppn/190630396
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Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 99E60.

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Date of creation: 1999
Handle: RePEc:gro:rugsom:99e60
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  1. anonymous, 1995. "Does the bouncing ball lead to economic growth?," Regional Update, Federal Reserve Bank of Atlanta, issue Jul, pages 1-2,4-6.
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  8. Xavier Sala-I-Martin, 1997. "Transfers, Social Safety Nets, and Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 81-102, March.
  9. Martin Mühleisen & Dhaneshwar Ghura & Roger Nord & Michael T. Hadjimichael & E. Murat Ucer, 1995. "Sub-Saharan Africa; Growth, Savings, and Investment, 1986-93," IMF Occasional Papers 118, International Monetary Fund.
  10. Griffin, Keith, 1970. "Foreign Capital, Domestic Savings and Economic Development," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 32(2), pages 99-112, May.
  11. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
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