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Does aid help improve economic institutions ?


  • Coviello, Decio
  • Islam, Roumeen


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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    References listed on IDEAS

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    Cited by:

    1. Busse, Matthias & Hoekstra, Ruth & Osei, Robert, 2013. "The Effectiveness of Aid in Improving Regulations: Empirical evidence and the drivers of change in Rwanda," IEE Working Papers 198, Institut fuer Entwicklungsforschung und Entwicklungspolitik, Ruhr-Universitaet Bochum.
    2. 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.
    3. repec:bla:sajeco:v:85:y:2017:i:3:p:368-385 is not listed on IDEAS
    4. Thierry Kangoye, 2008. "Instability from trade and democracy: the long-run effect of aid," Post-Print hal-00331902, HAL.
    5. 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.
    6. Thierry Somlawende KANGOYE, 2008. "On the potential of foreign aid to protect democracy against instability from trade," Working Papers 200821, CERDI.
    7. Kangoye, Thierry, 2011. "Does Foreign Aid Promote Democracy?," WIDER Working Paper Series 064, World Institute for Development Economic Research (UNU-WIDER).
    8. 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.
    9. 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.
    10. 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.
    11. Askarov, Zohid & Doucouliagos, Hristos, 2015. "Development Aid and Growth in Transition Countries," World Development, Elsevier, vol. 66(C), pages 383-399.
    12. Thierry Kangoye, 2008. "Instability from trade and democracy: the long-run effect of aid," Economics Bulletin, AccessEcon, vol. 6(41), pages 1-16.


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