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2004): On the empirics of foreign aid and growth
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| Venue: | Economic Journal |
| Citations: | 141 - 8 self |
BibTeX
@ARTICLE{Dalgaard_2004):on,
author = {Carl-johan Dalgaard and Henrik Hansen and Finn Tarp},
title = {2004): On the empirics of foreign aid and growth},
journal = {Economic Journal},
year = {},
pages = {191--216}
}
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Abstract
The present paper re-examines the effectiveness of foreign aid theoretically and empirically. Using a standard OLG model we show that aid inflows will in general affect long-run pro-ductivity. The size and direction of the impact may depend on policies, ‘deep ’ structural characteristics and the size of the inflow. The empirical analysis investigates these possibi-lities. Overall we find that aid has been effective in spurring growth, but the magnitude of the effect depends on climate-related circumstances. Finally, we argue that the Collier-Dollar allocation rule should be seriously reconsidered by donor agencies if aid effectiveness is related to climate. The usefulness of foreign aid in promoting growth in developing countries has been an area of controversy ever since Rosenstein-Rodan in 1943 advocated for aid to Eastern and South-Eastern Europe. Browsing through successive editions of a leading textbook in development economics provides a telling illustration of how the confidence in aid effectiveness dwindled over the years. In the first edition of ‘Leading Issues in Economic Development’, Meier (1964) dedicated a full 18-page section to the issue of foreign aid. He started out asking: ‘How much aid?’. By the
Keyphrases
foreign aid aid effectiveness much aid deep structural characteristic successive edition standard olg model full 18-page section economic development aid inflow general affect long-run pro-ductivity empirical analysis first edition climate-related circumstance south-eastern europe collier-dollar allocation rule development economics present paper donor agency
