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Aid Effectiveness: Opening the Black Box

  • Channing Arndt
  • Sam Jones
  • Finn Tarp

Controversy over the aggregate impact of foreign aid has focused on reduced form estimates of the aid-growth link. The causal chain, through which aid affects developmental outcomes including growth, has received much less attention. We address this gap by: (i) specifying a structural model of the main relationships; (ii) estimating the impact of aid on a range of final and intermediate outcomes; and (iii) quantifying a simplied representation of the full structural form, where aid impacts on growth through key intermediate outcomes. A coherent picture emerges: aid stimulates growth and reduces poverty through physical capital investment and improvements in health.

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File URL: http://www.wider.unu.edu/stc/repec/pdfs/wp2011/wp2011-44.pdf
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Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number UNU-WIDER Working Paper WP2011/44.

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Length: 30 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:unu:wpaper:wp2011-44
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