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Evaluating Aid Effectiveness in the Aggregate: A critical assessment of the evidence


  • Carl-Johan, Dalgaard
  • Henrik, Hansen


The purpose of the present evaluation study is to discuss the empirical studies that attempt to estimate the impact of foreign aid on economic growth. The study draws on a previous evaluation study (Dalgaard and Hansen, 2009), which introduces the general econometric methodology involved in making assessments about the aggregate impact of aid. In order to fully benefit from the discussion below it is therefore advisable for readers without prior knowledge of econometrics to review the material discussed in Dalgaard and Hansen (2009). The present study provides insights into the following questions 1. What are the central mechanisms linking aid to growth? 2. How much should one expect from aid a priori? 3. What are the best available estimates of the impact from total aid on economic growth in income per capita? 4. Does aid modality matter?

Suggested Citation

  • Carl-Johan, Dalgaard & Henrik, Hansen, 2010. "Evaluating Aid Effectiveness in the Aggregate: A critical assessment of the evidence," MPRA Paper 23026, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:23026

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    References listed on IDEAS

    1. Matteo Cervellati & Uwe Sunde, 2011. "Life expectancy and economic growth: the role of the demographic transition," Journal of Economic Growth, Springer, vol. 16(2), pages 99-133, June.
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    3. Daron Acemoglu & Simon Johnson, 2007. "Disease and Development: The Effect of Life Expectancy on Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 115(6), pages 925-985, December.
    4. Angeles, Luis & Neanidis, Kyriakos C., 2009. "Aid effectiveness: the role of the local elite," Journal of Development Economics, Elsevier, vol. 90(1), pages 120-134, September.
    5. Annen Kurt & Kosempel Stephen, 2009. "Foreign Aid, Donor Fragmentation, and Economic Growth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 9(1), pages 1-32, August.
    6. Bazoumana Ouattara & Eric Strobl, 2008. "Aid, Policy and Growth: Does Aid Modality Matter?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(2), pages 347-365, July.
    7. Carl-Johan, Dalgaard & Henrik, Hansen, 2009. "Evaluating Aid Effectiveness in the Aggregate: Methodological Issues," MPRA Paper 23025, University Library of Munich, Germany.
    8. 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.
    9. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
    10. David E. Bloom & David Canning & Günther Fink, 2014. "Disease and Development Revisited," Journal of Political Economy, University of Chicago Press, vol. 122(6), pages 1355-1366.
    11. Areendam Chanda & Carl-Johan Dalgaard, 2003. "Dual Economies and International Total Factor Productivity Differences," Macroeconomics 0305002, EconWPA.
    12. 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.
    13. Minoiu, Camelia & Reddy, Sanjay G., 2010. "Development aid and economic growth: A positive long-run relation," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(1), pages 27-39, February.
    14. Dalgaard, Carl-Johan & Erickson, Lennart, 2009. "Reasonable Expectations and the First Millennium Development Goal: How Much Can Aid Achieve?," World Development, Elsevier, vol. 37(7), pages 1170-1181, July.
    15. 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.
    16. Francesco Caselli & James Feyrer, 2007. "The Marginal Product of Capital," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 535-568.
    17. Michael A. Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting chickens when they hatch: The short-term effect of aid on growth," International Finance 0407010, EconWPA.
    18. Quamrul H. Ashraf & Ashley Lester & David N. Weil, 2009. "When Does Improving Health Raise GDP?," NBER Chapters,in: NBER Macroeconomics Annual 2008, Volume 23, pages 157-204 National Bureau of Economic Research, Inc.
    19. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. "Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-389, September.
    20. Thomas Barnebeck Andersen & Carl-Johan Dalgaard, 2006. "Cross-Border Flows of People, Technology Diffusion and Aggregate Productivity," DEGIT Conference Papers c011_006, DEGIT, Dynamics, Economic Growth, and International Trade.
    21. Hoeffler, Anke E, 2002. " The Augmented Solow Model and the African Growth Debate," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(2), pages 135-158, May.
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    1. repec:spd:journl:v:67:y:2017:i:4:p:85-99 is not listed on IDEAS
    2. Carl-Johan, Dalgaard & Henrik, Hansen, 2009. "Evaluating Aid Effectiveness in the Aggregate: Methodological Issues," MPRA Paper 23025, University Library of Munich, Germany.

    More about this item


    Economic growth; foreign aid;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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