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Aid and Growth in Fragile States

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  • McGillivray, Mark
  • Feeny, Simon

Abstract

The literature on aid has come a long way in recent years, and as a result we now know much more about aid effectiveness than possibly ever before. But significant gaps in knowledge remain. One such gap is the effectiveness of aid in the so-called ?fragile states?, countries with critically low policy and institutional performance ratings. The current paper addresses this void by examining possible links between aid and economic growth in fragile states. It finds that: (i) growth would have been 1.4 percentage points lower in highly fragile states in the absence of aid to them, compared to 2.5 percentage points in other countries; (ii) highly fragile states from a per capita income growth perspective can only efficiently absorb approximately one-third of the amounts of aid that other countries can, and; (iii) while from the same perspective most fragile states are under-aided, to the extent that they could efficiently absorb greater amounts of aid than they currently receive, many of the highly fragile states are substantially over-aided in this sense. The overall conclusion is that donors need to look very closely at their aid to the sub-set of fragile states deemed in this paper as highly fragile.

Suggested Citation

  • McGillivray, Mark & Feeny, Simon, 2008. "Aid and Growth in Fragile States," WIDER Working Paper Series 003, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:rp2008-03
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    File URL: http://www.wider.unu.edu/sites/default/files/rp2008-03.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Graziella Bertocchi, 2011. "Growth, Colonization, and Institutional Development. In and Out of Africa," Center for Economic Research (RECent) 064, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    2. Oasis Kodila-Tedika & Asongu Simplice, 2016. "State fragility, rent seeking and lobbying: evidence from African data," International Journal of Social Economics, Emerald Group Publishing, vol. 43(10), pages 1016-1030, October.
    3. Tadesse, Tasew, 2011. "Foreign aid and economic growth in Ethiopia," MPRA Paper 33953, University Library of Munich, Germany, revised 20 Sep 2011.
    4. World Bank, 2011. "Republic of Burundi - Country Economic Memorandum (CEM) : The Challenge of Achieving Stable and Shared Growth," World Bank Other Operational Studies 2769, The World Bank.
    5. Patrick Guillaumont, 2009. "An Economic Vulnerability Index: Its Design and Use for International Development Policy," Oxford Development Studies, Taylor & Francis Journals, vol. 37(3), pages 193-228.
    6. Simon Feeny & Mark McGillivray, 2009. "Aid allocation to fragile states: Absorptive capacity constraints," Journal of International Development, John Wiley & Sons, Ltd., vol. 21(5), pages 618-632.
    7. Graziella Bertocchi & Andrea Guerzoni, 2010. "Growth, History, or Institutions? What Explains State Fragility in Sub-Saharan Africa," Department of Economics 0625, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    8. Rachael Calleja & David Carment & Mark Haichin & Peter Tikuisis, 2017. "Backsliding and reversal: The J-Curve revisited," WIDER Working Paper Series 170, World Institute for Development Economic Research (UNU-WIDER).
    9. UNDP Regional Bureau for Africa, "undated". "Conclusions and Policy Recommendations," UNDP Africa Policy Notes 2017-18, United Nations Development Programme, Regional Bureau for Africa.

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    Keywords

    foreign aid; economic growth; fragile states; policies; absorptive capacity;

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