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Do institutions and social cohesion enhance the effectiveness of aid? New Evidence from Africa

  • Mina Baliamoune-Lutz

    ()

Using the Arellano-Bond dynamic panel GMM estimator, this paper explores the effects of aid, institutions, and social cohesion on per-capita income growth in 34 African countries, focusing in particular on the interplay of aid and institutions and the interplay of aid and social cohesion. The empirical results indicate that social cohesion enhances the growth effects of aid but there is a threshold effect, suggesting that aid becomes effective in enhancing growth in countries with higher social cohesion. Surprisingly, the results show that beyond a certain level of improvements in institutional quality, institutions (political rights and civil liberties) reduce the effectiveness of aid. We discuss the implications of these results.

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File URL: http://servizi.sme.unito.it/icer_repec/RePEc/icr/wp2011/ICERwp13-11.pdf
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Paper provided by ICER - International Centre for Economic Research in its series ICER Working Papers with number 13-2011.

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Length: 32 pages
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:icr:wpicer:13-2011
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  12. Baliamoune-Lutz, Mina N. & Mavrotas, George, 2008. "Aid Effectiveness: Looking at the Aid-Social Capital-Growth Nexus," Working Paper Series RP2008/75, World Institute for Development Economic Research (UNU-WIDER).
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  20. Papanek, Gustav F, 1972. "The Effect of Aid and other Resource Transfers on Savings and Growth in Less Developed Countries," Economic Journal, Royal Economic Society, vol. 82(327), pages 934-50, September.
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  22. Kasekende Louis & Brixova Zuzana & Ndikumana Leonce, 2010. "Africa: Africa's Counter-Cyclical Policy Responses to the Crisis," Journal of Globalization and Development, De Gruyter, vol. 1(1), pages 1-22, January.
  23. Montalvo, Jose G. & Reynal-Querol, Marta, 2005. "Ethnic diversity and economic development," Journal of Development Economics, Elsevier, vol. 76(2), pages 293-323, April.
  24. R. Lensink & H. White, 2001. "Are There Negative Returns to Aid?," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 42-65.
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  26. Bluedorn, John C., 2001. "Can democracy help? Growth and ethnic divisions," Economics Letters, Elsevier, vol. 70(1), pages 121-126, January.
  27. Baliamoune-Lutz, Mina, 2009. "Institutions, trade, and social cohesion in fragile states: Implications for policy conditionality and aid allocation," Journal of Policy Modeling, Elsevier, vol. 31(6), pages 877-890, November.
  28. Mina Baliamoune, 2009. "Policy Reform and Aid Effectiveness in Africa," ICER Working Papers 19-2009, ICER - International Centre for Economic Research.
  29. Stephen Knack, 2001. "Aid Dependence and the Quality of Governance: Cross-Country Empirical Tests," Southern Economic Journal, Southern Economic Association, vol. 68(2), pages 310-329, October.
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