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To Invest or Insure? A Comment on Wright (2008)



Wright (2008) investigates how the impact of foreign aid on GDP growth in dictatorships depends on the dictator’s time horizon, i.e., how much longer the dictator expects to be in office. The empirical analysis finds a strong positive impact of aid on growth for dictators with long time horizons and a strong negative impact for dictators with short time horizons. Rerunning Wright’s specifications, we find the positive effect depends on two outlier observations for Jordan. Omitting these observations, aid has no effect in long time horizon dictatorships but continues to have a negative impact in short time horizon dictatorships. Thus, Wright’s core result—the dependence on leadership tenure expectations—survives, but the policy implications are radically different.

Suggested Citation

  • Christopher Kilby & Christopher Kline, 2012. "To Invest or Insure? A Comment on Wright (2008)," Villanova School of Business Department of Economics and Statistics Working Paper Series 21, Villanova School of Business Department of Economics and Statistics.
  • Handle: RePEc:vil:papers:21

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    References listed on IDEAS

    1. Angus Deaton, 2010. "Instruments, Randomization, and Learning about Development," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 424-455, June.
    2. Michael A. Clemens & Steven Radelet & Rikhil R. Bhavnani & Samuel Bazzi, 2012. "Counting Chickens when they Hatch: Timing and the Effects of Aid on Growth," Economic Journal, Royal Economic Society, vol. 122(561), pages 590-617, June.
    3. Kilby, Christopher & Dreher, Axel, 2010. "The impact of aid on growth revisited: Do donor motives matter?," Economics Letters, Elsevier, vol. 107(3), pages 338-340, June.
    4. Raghuram G. Rajan & Arvind Subramanian, 2008. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 643-665, November.
    5. repec:pri:rpdevs:deaton_instruments_randomization_learning_all_04april_2010 is not listed on IDEAS
    6. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    7. Minoiu, Camelia & Reddy, Sanjay G., 2010. "Development aid and economic growth: A positive long-run relation," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(1), pages 27-39, February.
    8. 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.
    9. Hyde, Susan D. & Marinov, Nikolay, 2012. "Which Elections Can Be Lost?," Political Analysis, Cambridge University Press, vol. 20(02), pages 191-210, March.
    10. repec:cup:apsrev:v:87:y:1993:i:03:p:567-576_10 is not listed on IDEAS
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    More about this item


    Growth; Aid; Dictator;

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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