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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.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3990.

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Date of creation: 01 Aug 2006
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Handle: RePEc:wbk:wbrwps:3990
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