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

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  • Mina Baliamoune-Lutz

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Abstract

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.

Suggested Citation

  • Mina Baliamoune-Lutz, 2011. "Do institutions and social cohesion enhance the effectiveness of aid? New Evidence from Africa," ICER Working Papers 13-2011, ICER - International Centre for Economic Research.
  • Handle: RePEc:icr:wpicer:13-2011
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    Cited by:

    1. Xin, Guangyi, 2017. "Trust and Economic Performance: A Panel Study," MPRA Paper 80815, University Library of Munich, Germany.

    More about this item

    Keywords

    Growth; aid effectiveness; institutions; social cohesion; Africa;

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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