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Does aid help improve economic institutions ?

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  • Coviello, Decio
  • Islam, Roumeen

Abstract

Aid is expected to promote better living standards by raising investment and growth. But aid may also affect institutions directly. In theory, these effects may or may not work in the same direction as those on investment. The authors examine the effect of aid on economic institutions and find that aid has neither a positive nor a negative impact on existing measures of economic institutions. They find the results using pooled data for non-overlapping five-year periods, confirmed by pooled annual regressions for a large panel of countries and by pure cross-section regressions. The authors explicitly allow for time invariant effects that are country specific and find the results to be robust to model specifications, estimation methods, and different data sets.

Suggested Citation

  • Coviello, Decio & Islam, Roumeen, 2006. "Does aid help improve economic institutions ?," Policy Research Working Paper Series 3990, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3990
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    Cited by:

    1. Charles Kenny, 2008. "What is effective aid? How would donors allocate it?," The European Journal of Development Research, Taylor and Francis Journals, vol. 20(2), pages 330-346.
    2. Matthias Busse & Ruth Hoekstra & Robert Darko Osei, 2017. "The Effectiveness of aid in Improving Regulations: An Empirical Assessment," South African Journal of Economics, Economic Society of South Africa, vol. 85(3), pages 368-385, September.
    3. Thierry Kangoye, 2008. "Instability from trade and democracy: the long-run effect of aid," Post-Print hal-00331902, HAL.
    4. Zohid Askarov & Hristos Doucouliagos, 2013. "Does aid improve democracy and governance? A meta-regression analysis," Public Choice, Springer, vol. 157(3), pages 601-628, December.
    5. Thierry Kangoye, 2011. "On the potential of foreign aid to protect democracy against instability from trade," CERDI Working papers halshs-00556697, HAL.
    6. Thierry Somlawende KANGOYE, 2008. "On the potential of foreign aid to protect democracy against instability from trade," Working Papers 200821, CERDI.
    7. Busse, Matthias & Hoekstra, Ruth & Osei, Robert D., 2013. "The Effectiveness of Aid in Improving Regulations: Empirical evidence and the drivers of change in Rwanda," IEE Working Papers 198, Ruhr University Bochum, Institute of Development Research and Development Policy (IEE).
    8. Joseph Wright, 2009. "How Foreign Aid Can Foster Democratization in Authoritarian Regimes," American Journal of Political Science, John Wiley & Sons, vol. 53(3), pages 552-571, July.
    9. Miraj ul Haq & Nuzhat Shamim & Muhammad Luqman, 2020. "Foreign Aid, Political Institutions and Economic Freedom: Empirical Evidence from Selected Developing Countries," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 25(1), pages 153-178, Jan-June.
    10. Bandeira, Pablo, 2009. "El desarrollo institucional en el contexto de la ineficacia de la ayuda: ¿qué podemos hacer? [Promoting institutional development in the context of actual aid ineffectiveness: what can we do?]," MPRA Paper 13372, University Library of Munich, Germany.
    11. Thierry Kangoye, 2008. "Instability from trade and democracy: the long-run effect of aid," Economics Bulletin, AccessEcon, vol. 6(41), pages 1-16.
    12. Dijkstra, Geske, 2018. "Aid and good governance: Examining aggregate unintended effects of aid," Evaluation and Program Planning, Elsevier, vol. 68(C), pages 225-232.
    13. Kangoye, Thierry, 2011. "Does Foreign Aid Promote Democracy?," WIDER Working Paper Series 064, World Institute for Development Economic Research (UNU-WIDER).
    14. Alali, Walid Y., 2010. "Role of Political Institutions on Economic Growth: Empirical Evidence," MPRA Paper 115611, University Library of Munich, Germany.
    15. Thierry Kangoye, 2011. "Does Foreign Aid Promote Democracy?," WIDER Working Paper Series wp-2011-064, World Institute for Development Economic Research (UNU-WIDER).
    16. Dutta, Nabamita & Williamson, Claudia R., 2016. "Aiding economic freedom: Exploring the role of political institutions," European Journal of Political Economy, Elsevier, vol. 45(S), pages 24-38.
    17. Young, Andrew T. & Sheehan, Kathleen M., 2014. "Foreign aid, institutional quality, and growth," European Journal of Political Economy, Elsevier, vol. 36(C), pages 195-208.
    18. repec:ebl:ecbull:v:6:y:2008:i:41:p:1-16 is not listed on IDEAS
    19. Feeny, Simon & de Silva, Ashton, 2012. "Measuring absorptive capacity constraints to foreign aid," Economic Modelling, Elsevier, vol. 29(3), pages 725-733.
    20. Askarov, Zohid & Doucouliagos, Hristos, 2015. "Development Aid and Growth in Transition Countries," World Development, Elsevier, vol. 66(C), pages 383-399.
    21. Nabamita Dutta & Russell S. Sobel & Sanjukta Roy, 2016. "Foreign aid’s impact on domestic business climates - an empirical analysis with SSA and MENA countries," Journal of Entrepreneurship and Public Policy, Emerald Group Publishing, vol. 5(3), pages 365-382, November.

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