IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

All the Conditions of Effective Foreign Aid

The conclusion that foreign aid will promote economic growth only when allocated towards good policy regimes has been the subject of considerable debate. Aid effectiveness researchers have variously sought to falsify this result or to find other individual conditions of aid effectiveness. However, economic theory suggests that any factor which influences the expected returns to investment may influence the effect of aid on growth even when aid is partly diverted to consumption. To investigate this hypothesis, �all� of the hypothesized conditions of aid effectiveness are individually tested in a cross-country growth specification. From these tests the most significant and robust individual interactions are simultaneously modeled, thereby deriving multiple conditions of aid effectiveness. The paper concludes that aid is more effective in economies experiencing economic shocks or recovering from war, and less effective in countries which are geographically disadvantaged or at war. We also find a previously unidentified condition of aid ineffectiveness: the inflow of foreign direct investment. This finding renews a justified interest in the policy-aid-growth nexus, insofar as domestic policy determines the distribution of aid and FDI flow, which appear to act as substitutes in the growth process.

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.uq.edu.au/economics/cepa/docs/WP/WP042004.pdf
Download Restriction: no

Paper provided by School of Economics, University of Queensland, Australia in its series CEPA Working Papers Series with number WP042004.

as
in new window

Length:
Date of creation: Aug 2004
Date of revision:
Handle: RePEc:qld:uqcepa:09
Contact details of provider: Postal: St. Lucia, Qld. 4072
Phone: +61 7 3365 6570
Fax: +61 7 3365 7299
Web page: http://www.uq.edu.au/economics/
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. 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.
  2. Robert Lensink & Howard White, 2000. "Assessing Aid: A Manifesto for Aid in the 21st Century?," Oxford Development Studies, Taylor & Francis Journals, vol. 28(1), pages 5-18.
  3. Hansen, Henrik & Tarp, Finn, 2000. "Aid and Growth Regressions," MPRA Paper 62288, University Library of Munich, Germany.
  4. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
  5. Michael Clemens, 2002. "World Bank Capital Neither Complements Nor Substitutes for Private Capital," Working Papers 20, Center for Global Development.
  6. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September.
  7. 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.
  8. Renard, Robrecht & Cassimon, Danny, 2001. "On the Pitfalls of Measuring Aid," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  9. Lisa CHAUVET & Patrick GUILLAUMONT, 2003. "Aid and Growth Revisited: Policy, Economic Vulnerability and Political Instability," Working Papers 200327, CERDI.
  10. 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.
  11. Alberto Alesina & Roberto Perotti, 1993. "Income Distribution, Political Instability, and Investment," NBER Working Papers 4486, National Bureau of Economic Research, Inc.
  12. David Roodman, 2007. "The Anarchy of Numbers: Aid, Development, and Cross-Country Empirics," World Bank Economic Review, World Bank Group, vol. 21(2), pages 255-277, May.
  13. Collier, Paul & Hoeffler, Anke, 2004. "Aid, policy and growth in post-conflict societies," European Economic Review, Elsevier, vol. 48(5), pages 1125-1145, October.
  14. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
  15. Patrick GUILLAUMONT & Lisa CHAUVET, 1999. "Aid and Performance: A Reassessment," Working Papers 199910, CERDI.
  16. Chang, Charles C. & Fernandez-Arias, Eduardo & Serven, Luis, 1999. "Measuring aid flows : a new approach," Policy Research Working Paper Series 2050, The World Bank.
  17. Wacziarg, Romain & Welch, Karen Horn, 2003. "Trade Liberalization and Growth: New Evidence," Research Papers 1826, Stanford University, Graduate School of Business.
  18. Hansen, Henrik & Tarp, Finn, 1999. "Aid Effectiveness Disputed," MPRA Paper 62290, University Library of Munich, Germany.
  19. Roland-Holst, David & Tarp, Finn, 2004. "New Perspectives on Aid Effectiveness," MPRA Paper 29823, University Library of Munich, Germany.
  20. Collier, Paul & Dehn, Jan, 2001. "Aid, shocks, and growth," Policy Research Working Paper Series 2688, The World Bank.
  21. Tjalling C. Koopmans, 1963. "On the Concept of Optimal Economic Growth," Cowles Foundation Discussion Papers 163, Cowles Foundation for Research in Economics, Yale University.
  22. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
  23. John Hudson & Paul Mosley, 2001. "Aid policies and growth: in search of the holy grail," Journal of International Development, John Wiley & Sons, Ltd., vol. 13(7), pages 1023-1038.
  24. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
  25. R. Lensink & H. White, 2001. "Are There Negative Returns to Aid?," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 42-65.
  26. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
  27. James Murdoch & Todd Sandler, 2002. "Civil wars and economic growth: A regional comparison," Defence and Peace Economics, Taylor & Francis Journals, vol. 13(6), pages 451-464.
  28. Paul Mosley & John Hudson & Arjan Verschoor, 2004. "Aid, Poverty Reduction and the 'New Conditionality'," Economic Journal, Royal Economic Society, vol. 114(496), pages F217-F243, 06.
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:qld:uqcepa:09. 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: (SOE IT)

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.