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Is aid the capital component making countries efficient?

Author

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  • Veiderpass, Ann

    () (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Andersson, Per-Åke

    () (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

Cross country regressions on aid effectiveness have failed to provide substantial evidence on the effects of foreign aid. This study focuses on country performance in a production theory context. By means of the non-parametric DEA method, we study 60 individual low and middle income countries between 1995 and 2000. Is there a systematic correlation between resource intensity and country efficiency? We find indications of a positive relation between capital intensity and country efficiency. We then investigate whether aid is the conclusive part of capital providing this correlation, but when linking country efficiency development to aid, there is no clear pattern to be found.

Suggested Citation

  • Veiderpass, Ann & Andersson, Per-Åke, 2009. "Is aid the capital component making countries efficient?," Working Papers in Economics 333, University of Gothenburg, Department of Economics.
  • Handle: RePEc:hhs:gunwpe:0333
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    File URL: http://hdl.handle.net/2077/18966
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    References listed on IDEAS

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    1. Forsund, Finn R & Hjalmarsson, Lennart, 1979. "Generalised Farrell Measures of Efficiency: An Application to Milk Processing in Swedish Dairy Plants," Economic Journal, Royal Economic Society, vol. 89(354), pages 294-315, June.
    2. Arvind Subramanian & Raghuram Rajan, 2005. "What Undermines Aid’s Impact on Growth?," IMF Working Papers 05/126, International Monetary Fund.
    3. P. Guillaumont & L. Chauvet, 2001. "Aid and Performance: A Reassessment," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 66-92.
    4. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April.
    5. Isgut, Alberto & Tello, Mario & Veiderpass, Ann, 1998. "Microeconomic Adjustment During Structural Reforms: The Nicaraguan Manufacturing Sector 1991-1995," Working Papers in Economics 11, University of Gothenburg, Department of Economics.
    6. Collier, Paul & Hoeffler, Anke, 2004. "Aid, policy and growth in post-conflict societies," European Economic Review, Elsevier, vol. 48(5), pages 1125-1145, October.
    7. C-J. Dalgaard & H. Hansen, 2001. "On Aid, Growth and Good Policies," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 17-41.
    8. William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
    9. Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2004. "On The Empirics of Foreign Aid and Growth," Economic Journal, Royal Economic Society, vol. 114(496), pages 191-216, June.
    10. Tulkens, H. & Vanden Eeckaut, Ph., 1991. "Non-frontier measures of efficiency, progress and regress," CORE Discussion Papers 1991055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    More about this item

    Keywords

    Aid; efficiency; country comparison; production approach;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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