IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Aid and Growth: Have We Come Full Circle?

Listed author(s):
  • Channing Arndt

    (Department of Economics, University of Copenhagen)

  • Sam Jones

    (Department of Economics, University of Copenhagen)

  • Finn Tarp

    (Department of Economics, University of Copenhagen)

The micro-macro paradox has been revived. Despite broadly positive evaluations at the micro and meso-levels, recent literature has turned decidedly pessimistic with respect to the ability of foreign aid to foster economic growth. Policy implications, such as the complete cessation of aid to Africa, are being drawn on the basis of fragile evidence. This paper first assesses the aid-growth literature with a focus on recent contributions. The aid-growth literature is then framed, for the first time, in terms of the Rubin Causal Model, applied at the macroeconomic level. Our results show that aid has a positive and statistically significant causal effect on growth over the long run with point estimates at levels suggested by growth theory. We conclude that aid remains an important tool for enhancing the development prospects of poor nations.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.econ.ku.dk/english/research/publications/wp/dp_2009/0922.pdf/
Download Restriction: no

Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 09-22.

as
in new window

Length: 31 pages
Date of creation: Oct 2009
Handle: RePEc:kud:kuiedp:0922
Contact details of provider: Postal:
Øster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark

Phone: (+45) 35 32 30 10
Fax: +45 35 32 30 00
Web page: http://www.econ.ku.dk
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April.
  2. Hansen, Henrik & Tarp, Finn, 1999. "Aid Effectiveness Disputed," MPRA Paper 62290, University Library of Munich, Germany.
  3. John C. Chao & Norman R. Swanson, 2005. "Consistent Estimation with a Large Number of Weak Instruments," Econometrica, Econometric Society, vol. 73(5), pages 1673-1692, 09.
  4. Dollar, David & Alesina, Alberto, 2000. "Who Gives Foreign Aid to Whom and Why?," Scholarly Articles 4553020, Harvard University Department of Economics.
  5. Richard Blundell & Monica Costa Dias, 2008. "Alternative approaches to evaluation in empirical microeconomics," CeMMAP working papers CWP26/08, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  6. Banerjee, Abhijit & Duflo, Esther, 2008. "The Experimental Approach to Development Economics," CEPR Discussion Papers 7037, C.E.P.R. Discussion Papers.
  7. Maurice J.G. Bun & Frank Windmeijer, 2009. "The Weak Instrument Problem of the System GMM Estimator in Dynamic Panel Data Models," Tinbergen Institute Discussion Papers 09-086/4, Tinbergen Institute.
  8. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, 02.
  9. Carl-Johan Dalgaard & Lennart Erickson, 2007. "Reasonable Expectations and the First Millennium Development Goal: How Much Can Aid Achieve?," Discussion Papers 07-18, University of Copenhagen. Department of Economics.
  10. Raghuram Rajan & Arvind Subramanian, 2005. "Aid and Growth; What Does the Cross-Country Evidence Really Show?," IMF Working Papers 05/127, International Monetary Fund.
  11. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2007. "The Economic Consequences of Legal Origins," NBER Working Papers 13608, National Bureau of Economic Research, Inc.
  12. Finn Tarp, 2006. "Aid and Development," Discussion Papers 06-12, University of Copenhagen. Department of Economics.
  13. Imbens, Guido W. & Wooldridge, Jeffrey M., 2008. "Recent Developments in the Econometrics of Program Evaluation," IZA Discussion Papers 3640, Institute for the Study of Labor (IZA).
  14. William R. Hauk & Romain Wacziarg, 2004. "A Monte Carlo Study of Growth Regressions," NBER Technical Working Papers 0296, National Bureau of Economic Research, Inc.
  15. Quamrul Ashraf & Ashley Lester & David Weil, 2008. "When Does Improving Health Raise GDP?," Working Papers 2008-7, Brown University, Department of Economics.
  16. Michael P. Murray, 2006. "Avoiding Invalid Instruments and Coping with Weak Instruments," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 111-132, Fall.
  17. Carl-Johan Dalgaard & Henrik Hansen & Finn Tarp, 2001. "On the Empirics of Foreign Aid and Growth," EPRU Working Paper Series 03-13, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Sep 2003.
  18. David Card, 2000. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," NBER Working Papers 7769, National Bureau of Economic Research, Inc.
  19. François Bourguignon & Mark Sundberg, 2007. "Aid Effectiveness – Opening the Black Box," American Economic Review, American Economic Association, vol. 97(2), pages 316-321, May.
  20. Kanbur, Ravi, 2006. "The economics of international aid," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
  21. Joshua Angrist, 2004. "Treatment Effect Heterogeneity in Theory and Practice," Econometric Society 2004 North American Winter Meetings 186, Econometric Society.
  22. Temple, Jonathan, 2000. "Growth Regressions and What the Textbooks Don't Tell You," Bulletin of Economic Research, Wiley Blackwell, vol. 52(3), pages 181-205, July.
  23. David Roodman, 2004. "The Anarchy of Numbers: Aid, Development, and Cross-country Empirics," Development and Comp Systems 0412003, EconWPA.
  24. William Easterly, 2003. "Can Foreign Aid Buy Growth?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 23-48, Summer.
  25. Nathan Nunn, 2008. "The Long-term Effects of Africa's Slave Trades," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 139-176.
  26. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  27. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
  28. Wooldridge, Jeffrey M., 2005. "Violating Ignorability Of Treatment By Controlling For Too Many Factors," Econometric Theory, Cambridge University Press, vol. 21(05), pages 1026-1028, October.
  29. Daniel Cohen & Marcelo Soto, 2001. "Growth and Human Capital: Good Data, Good Results," OECD Development Centre Working Papers 179, OECD Publishing.
  30. Simeon Djankov & José García-Montalvo & Marta Reynal-Querol, 2005. "The curse of aid," Working Papers 257, Barcelona Graduate School of Economics.
  31. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  32. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2007. "Enhanced routines for instrumental variables/generalized method of moments estimation and testing," Stata Journal, StataCorp LP, vol. 7(4), pages 465-506, December.
  33. Michael Clemens & Samuel Bazzi, 2009. "Blunt Instruments: On Establishing the Causes of Economic Growth," Working Papers 171, Center for Global Development.
  34. Channing Arndt & Sam Jones & Finn Tarp, 2006. "Aid and Development: The Mozambican Case," Discussion Papers 06-13, University of Copenhagen. Department of Economics.
  35. In Choi & Peter C.B. Phillips, 1989. "Asymptotic and Finite Sample Distribution Theory for IV Estimators and Tests in Partially Identified Structural Equations," Cowles Foundation Discussion Papers 929, Cowles Foundation for Research in Economics, Yale University.
  36. Daron Acemoglu & Simon Johnson, 2006. "Disease and Development: The Effect of Life Expectancy on Economic Growth," NBER Working Papers 12269, National Bureau of Economic Research, Inc.
  37. Gernot Doppelhofer & Ronald I. Miller & Xavier Sala-i-Martin, 2000. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," NBER Working Papers 7750, National Bureau of Economic Research, Inc.
  38. Easterly, William, 1999. "The ghost of financing gap: testing the growth model used in the international financial institutions," Journal of Development Economics, Elsevier, vol. 60(2), pages 423-438, December.
  39. Collier, Paul & Hoeffler, Anke, 2002. "Aid, policy, and growth in post-conflict societies," Policy Research Working Paper Series 2902, The World Bank.
  40. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  41. Paul Mosley & John Hudson & Sara Horrell, 1992. "Aid, the public sector and the market in less developed countries: A return to the scene of the crime," Journal of International Development, John Wiley & Sons, Ltd., vol. 4(2), pages 139-150, 03.
  42. Boriana Yontcheva & Nadia Masud, 2005. "Does Foreign Aid Reduce Poverty? Empirical Evidence from Nongovernmental and Bilateral Aid," IMF Working Papers 05/100, International Monetary Fund.
  43. Angus Deaton, 2009. "Instruments of development: Randomization in the tropics, and the search for the elusive keys to economic development," Working Papers 1122, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
  44. Finn Tarp & Christian F. Bach & Henrik Hansen & Søren Baunsgaard, 1998. "Danish Aid Policy: Theory and Empirical Evidence," Discussion Papers 98-06, University of Copenhagen. Department of Economics.
  45. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-475, March.
  46. Mosley, Paul & Hudson, John & Horrell, Sara, 1987. "Aid, the Public Sector and the Market in Less Developed Countries," Economic Journal, Royal Economic Society, vol. 97(387), pages 616-641, September.
  47. Guido W. Imbens, 2004. "Nonparametric Estimation of Average Treatment Effects Under Exogeneity: A Review," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 4-29, February.
  48. Papanek, Gustav F, 1973. "Aid, Foreign Private Investment, Savings, and Growth in Less Developed Countries," Journal of Political Economy, University of Chicago Press, vol. 81(1), pages 120-130, Jan.-Feb..
  49. David Locke Newhouse & Prachi Mishra, 2007. "Health Aid and Infant Mortality," IMF Working Papers 07/100, International Monetary Fund.
  50. Johan Walt, 2009. "Dead aid: Why aid is not working and how there is a better way for Africa," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 22(4), pages 431-432, December.
  51. Raghuram Rajan & Arvind Subramanian, 2007. "Does Aid Affect Governance?," American Economic Review, American Economic Association, vol. 97(2), pages 322-327, May.
  52. 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 934-950, September.
  53. Easterly, William, 2009. "How the Millennium Development Goals are Unfair to Africa," World Development, Elsevier, vol. 37(1), pages 26-35, January.
  54. L Alan Winters, 2004. "Trade Liberalisation and Economic Performance: An Overview," Economic Journal, Royal Economic Society, vol. 114(493), pages 4-21, 02.
  55. Paul Collier & Jan Willem Gunning, 1999. "Why Has Africa Grown Slowly?," Journal of Economic Perspectives, American Economic Association, vol. 13(3), pages 3-22, Summer.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:kud:kuiedp:0922. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Hoffmann)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.