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Aid and Growth: Politics Matters

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Author Info
Matteo Bobba
Andrew Powell

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Abstract

The literature on aid effectiveness has focused more on recipient policies than the determinants of aid allocation yet a consistent result is that political allies obtain more aid from donors than non-allies. This paper shows that aid allocated to political allies is ineffective for growth, whereas aid extended to countries that are not allies is highly effective. The result appears to be robust across different specifications and estimation techniques. In particular, new methods are employed to control for endogeneity. The paper suggests that aid allocation should be scrutinized carefully to make aid as effective as possible.

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Paper provided by Inter-American Development Bank, Research Department in its series RES Working Papers with number 4511.

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Date of creation: Jan 2007
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Handle: RePEc:idb:wpaper:4511

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. David Roodman, 2004. "The Anarchy of Numbers: Aid, Development, and Cross-country Empirics," Development and Comp Systems 0412003, EconWPA. [Downloadable!]
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  3. Bond, Stephen Roy & Hoeffler, Anke & Temple, Jonathan, 2001. "GMM Estimation of Empirical Growth Models," CEPR Discussion Papers 3048, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. James H. Stock & Jonathan Wright, 2000. "GMM with Weak Identification," Econometrica, Econometric Society, vol. 68(5), pages 1055-1096, September.
  5. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March. [Downloadable!] (restricted)
  6. Craig Burnside & David Dollar, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September. [Downloadable!] (restricted)
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  7. William R. Hauk & Romain Wacziarg, 2004. "A Monte Carlo Study of Growth Regressions," NBER Technical Working Papers 0296, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Matteo Bobba & Andrew Powell, 2006. "Multilateral Intermediation of Foreign Aid: What is the Trade-Off for Donor Countries?," RES Working Papers 4500, Inter-American Development Bank, Research Department. [Downloadable!]
  9. Henrik Hansen & Finn Tarp, 2000. "Aid effectiveness disputed," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 375-398.
  10. Jeffrey A. Frankel & David Romer, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June. [Downloadable!] (restricted)
  11. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August. [Downloadable!] (restricted)
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  12. Collier, Paul & Hoeffler, Anke, 2002. "Military expenditure - threats, aid, and arms races," Policy Research Working Paper Series 2927, The World Bank. [Downloadable!]
  13. William Easterly & Ross Levine & David Roodman, 2003. "New Data, New Doubts: Revisiting "Aid, Policies, and Growth"," Working Papers 26, Center for Global Development. [Downloadable!]
  14. Collier, Paul & Dollar, David, 2002. "Aid allocation and poverty reduction," European Economic Review, Elsevier, vol. 46(8), pages 1475-1500, September. [Downloadable!] (restricted)
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  15. Alberto Chong & Mark Gradstein, 2006. "Who's Afraid of Foreign Aid? The Donors' Perspective," RES Working Papers 4452, Inter-American Development Bank, Research Department. [Downloadable!]
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  16. Alesina, Alberto & Dollar, David, 2000. " Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March. [Downloadable!] (restricted)
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  17. Michael Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting Chickens When They Hatch: The Short-term Effect of Aid on Growth," Working Papers 44, Center for Global Development. [Downloadable!]
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  18. Raghuram G. Rajan & Arvind Subramanian, 2005. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," NBER Working Papers 11513, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  1. Gonzalo Salinas & Abdikarim Farah & Emilio Sacerdoti, 2009. "The Macroeconomic Impact of Scaled-up Aid: The Case of Niger," IMF Working Papers 09/36, International Monetary Fund. [Downloadable!]
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