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The Great Aid Transition: How Global Crisis Reshaped Aid Effectiveness in Africa

Author

Listed:
  • Sambit Bhattacharyya
  • Chirantan Chatterjee

    (Department of Economics, University of Sussex, BN1 9SL Falmer, United Kingdom)

  • Stephen Lartey

Abstract

How do global crises affect development aid effectiveness? We explore this question by analyzing the impact of 2008 global financial crisis on development aid effectiveness in Africa using a novel triple-difference design (aid by donor × governance quality × trade exposure) estimated pre and post 2008 with nightlights data across 41 African countries observed over the period 2000 to 2021. We find Chinese aid to be effective in well governed and trade exposed countries following the crisis whereas OECD aid lost its governance dependent advantage. Structural break test confirms 2008 as a turning point for Chinese aid effectiveness. Total aid concentration outperforms aid diversification by 79% relative to pre-crisis patterns in terms of effectiveness. US aid appears to be inequality reducing post 2008. Chinese aid seems effective post 2008 irrespective of its modalities ‘ODA like’ and ‘other official flows’ whereas US aid is effective only under the modality ‘economic’. The results appear to be robust to GDP as an alternative outcome variable and placebo test.

Suggested Citation

  • Sambit Bhattacharyya & Chirantan Chatterjee & Stephen Lartey, 2026. "The Great Aid Transition: How Global Crisis Reshaped Aid Effectiveness in Africa," Working Paper Series 0126, Department of Economics, University of Sussex Business School.
    • Handle: RePEc:sus:susewp:0126
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    References listed on IDEAS

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    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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