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Development Aid and Economic Growth: A Positive Long-Run Relation

  • Sanjay G. Reddy
  • Camelia Minoiu

We analyze the growth impact of official development assistance to developing countries. Our approach is different from that of previous studies in two major ways. First, we disentangle the effects of two components of aid: a developmental, growth-enhancing component, and a geopolitical, possibly growth-depressing component. Second, our specifications allow for the effect of aid on economic growth to occur over long time-lags. Our results indicate that developmental aid promotes long-run growth. The effect is large and robustly significant, and withstands an array of robustness checks including alternative specifications, choices of the proxy for development aid, and treatments of outliers.

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File URL: http://www.un.org/esa/desa/papers/2006/wp29_2006.pdf
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Paper provided by United Nations, Department of Economics and Social Affairs in its series Working Papers with number 29.

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Length: 36 pages
Date of creation: Sep 2006
Date of revision:
Handle: RePEc:une:wpaper:29
Contact details of provider: Web page: http://www.un.org/en/development/desa/working-papers.html
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