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Consult your gods: the questionable economics of development assistance in Africa

  • Asongu, Simplice A

This paper assesses the aid-development nexus in 52 African countries using updated data (1996-2010) and a new indicator of human development (adjusted for inequality). The effects of Total Net Official Development Assistance (NODA), NODA from the Development Assistance Committee (DAC) and NODA from Multilateral donors on economic prosperity (at national and per capita levels) are also examined. The findings broadly indicate that development assistance is detrimental to GDP growth, GDP per capita growth and inequality adjusted human development. The magnitude of negativity (which is consistent across specifications and development dynamics) is highest for NODA from Multilateral donors, followed by NODA from DAC countries. Given concerns on the achievement of the MDGs, the relevance of these results point to the deficiency of foreign aid as a sustainable cure to poverty in Africa. Though the stated intents or purposes of aid are socio-economic, the actual impact from the findings negates this. It is a momentous epoque to solve the second tragedy of foreign aid; it is high time economists and policy makers start rethinking the models and theories on which foreign aid is based. In the meantime, it is up to people who care about the poor to hold aid agencies accountable for piecemeal results. Policy implications and caveats are discussed.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 48475.

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Date of creation: 20 Jul 2013
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Handle: RePEc:pra:mprapa:48475
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  1. Simplice Asongu, 2013. "How Would Population Growth Affect Investment in the Future? Asymmetric Panel Causality Evidence for Africa," African Development Review, African Development Bank, vol. 25(1), pages 14-29.
  2. Svensson, Jakob, 1998. "Foreign aid and rent-seeking," Policy Research Working Paper Series 1880, The World Bank.
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  4. Asongu, Simplice A, 2013. "On the effectiveness of foreign aid in institutional quality," MPRA Paper 46649, University Library of Munich, Germany.
  5. Simplice A. ASONGU, 2011. "Why Do French Civil–Law Countries Have Higher Levels Of Financial Efficiency?," Journal of Advanced Research in Law and Economics, ASERS Publishing, vol. 0(2), pages 94-108, December.
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  7. Asongu Simplice, 2012. "The political economy of development assistance: peril to government quality dynamics in Africa," Working Papers 12/008, African Governance and Development Institute..
  8. Simplice A, Asongu, 2012. "Globalization and Africa: implications for human development," MPRA Paper 36541, University Library of Munich, Germany.
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  10. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
  11. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
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  13. Okada, Keisuke & Samreth, Sovannroeun, 2011. "The effect of foreign aid on corruption: A quantile regression approach," MPRA Paper 27969, University Library of Munich, Germany.
  14. Antonio R. Andrés & Simplice A. Asongu, 2012. "Fighting software piracy: Which governance tools matter in Africa?," Development Research Working Paper Series 10/2012, Institute for Advanced Development Studies.
  15. 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.
  16. Fielding, David & McGillivray, Mark & Torres, Sebastian, 2006. "A Wider Approach to Aid Effectiveness: Correlated Impacts on Health, Wealth, Fertility and Education," Working Paper Series RP2006/23, World Institute for Development Economic Research (UNU-WIDER).
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  18. Simplice A Asongu, 2012. "On the effect of foreign aid on corruption," Economics Bulletin, AccessEcon, vol. 32(3), pages 2174-2180.
  19. William Easterly, 2002. "What did Structural Adjustment Adjust? The Association of Policies and Growth with Repeated IMF and World Bank Adjustment Loans," Working Papers 11, Center for Global Development.
  20. Patrick GUILLAUMONT & Lisa CHAUVET, 1999. "Aid and Performance: A Reassessment," Working Papers 199910, CERDI.
  21. 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.
  22. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-26, October.
  23. Simplice A, Asongu, 2012. "Government quality determinants of stock market performance in African countries," MPRA Paper 39631, University Library of Munich, Germany.
  24. William Easterly & Ross Levine & David Roodman, 2003. "New Data, New doubts: A Comment on Burnside and Dollar's "Aid, Policies, and Growth" (2000)," NBER Working Papers 9846, National Bureau of Economic Research, Inc.
  25. 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.
  26. René M. Stulz, 1999. "Golbalization, Corporate Finance, And The Cost Of Capital," Journal of Applied Corporate Finance, Morgan Stanley, vol. 12(3), pages 8-25.
  27. 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.
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