IDEAS home Printed from https://ideas.repec.org/a/pid/journl/v57y2018i2p145-174.html
   My bibliography  Save this article

Impact of Project and Programme Aid on Economic Growth: A Cross Country Analysis

Author

Listed:
  • Pervez Zamurrad Janjua

    (Department of Economics, Preston University, Islamabad)

  • Malik Muhammad

    (International Institute of Islamic Economics, International Islamic University, Islamabad.)

  • Muhammad Usman

    (International Institute of Islamic Economics, International Islamic University, Islamabad.)

Abstract

This study examines the impact of foreign aid instruments, namely Project Aid and Programme Aid, on economic growth of 27 aid-receiving countries. The study constructs a system of three equations, i.e. growth, investment and human capital. Using the Generalised Method of Moment estimation technique, the study concludes that while Project Aid has a positive and significant impact on economic growth, Programme Aid has an insignificant impact on economic growth. Additionally, the study finds that economic policies do enhance effectiveness of aid at aggregate level. Therefore, the capacity of aid-recipient countries to effectively use their resources for economic development needs due consideration.

Suggested Citation

  • Pervez Zamurrad Janjua & Malik Muhammad & Muhammad Usman, 2018. "Impact of Project and Programme Aid on Economic Growth: A Cross Country Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 57(2), pages 145-174.
    • Handle: RePEc:pid:journl:v:57:y:2018:i:2:p:145-174
    as

    Download full text from publisher

    File URL: http://www.pide.org.pk/pdf/PDR/2018/Volume2/145-174.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mumtaz Anwar & Katharina Michaelowa, 2006. "The Political Economy of US Aid to Pakistan," Review of Development Economics, Wiley Blackwell, vol. 10(2), pages 195-209, May.
    2. Muhammad Javid & Abdul Qayyum, 2010. "Foreign aid-growth nexus in pakistan: role of macroeconomic policies," Economics Bulletin, AccessEcon, vol. 30(4), pages 1-31.
    3. Mikael Lindahl & Alan B. Krueger, 2001. "Education for Growth: Why and for Whom?," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1101-1136, December.
    4. Robert Lensink & Oliver Morrissey, 2000. "Aid instability as a measure of uncertainty and the positive impact of aid on growth," Journal of Development Studies, Taylor & Francis Journals, vol. 36(3), pages 31-49.
    5. Daniel Cohen & Marcelo Soto, 2007. "Growth and human capital: good data, good results," Journal of Economic Growth, Springer, vol. 12(1), pages 51-76, March.
    6. Chaudhry, Mumtaz Anwar & Aman, Sughra, 2010. "Aid effectiveness in education sector of Pakistan," HWWI Research Papers 2-20, Hamburg Institute of International Economics (HWWI).
    7. Sandrina Berthault Moreira, 2005. "Evaluating The Impact Of Foreign Aid On Economic Growth: A Cross-Country Study," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 30(2), pages 25-48, December.
    8. Boriana Yontcheva & Mrs. Nadia Masud, 2005. "Does Foreign Aid Reduce Poverty? Empirical Evidence from Nongovernmental and Bilateral Aid," IMF Working Papers 2005/100, International Monetary Fund.
    9. John Hudson & Paul Mosley, 2001. "Aid policies and growth: in search of the holy grail," Journal of International Development, John Wiley & Sons, Ltd., vol. 13(7), pages 1023-1038.
    10. Scully, Gerald W, 1988. "The Institutional Framework and Economic Development," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 652-662, June.
    11. Bacha, Edmar L., 1990. "A three-gap model of foreign transfers and the GDP growth rate in developing countries," Journal of Development Economics, Elsevier, vol. 32(2), pages 279-296, April.
    12. C-J. Dalgaard & H. Hansen, 2001. "On Aid, Growth and Good Policies," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 17-41.
    13. Voxi Heinrich Amavilah, 1998. "German aid and trade versus Namibian GDP and labour productivity," Applied Economics, Taylor & Francis Journals, vol. 30(5), pages 689-695.
    14. Henrik Hansen & Finn Tarp, 2000. "Aid effectiveness disputed," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 375-398, April.
    15. M. J. Freire-Seren, 2002. "On the relationship between human capital accumulation and economic growth," Applied Economics Letters, Taylor & Francis Journals, vol. 9(12), pages 805-808.
    16. David Roodman, 2003. "The Anarchy of Numbers: Aid, Development, and Cross-country Empirics—Revised July 2004," Working Papers 32, Center for Global Development.
    17. Simon Feeny, 2005. "The Impact of Foreign Aid on Economic Growth in Papua New Guinea," Journal of Development Studies, Taylor & Francis Journals, vol. 41(6), pages 1092-1117.
    18. Greenwood, Jeremy & Smith, Bruce D., 1997. "Financial markets in development, and the development of financial markets," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 145-181, January.
    19. Michael A. Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting chickens when they hatch: The short-term effect of aid on growth," International Finance 0407010, University Library of Munich, Germany.
    20. George Mavrotas, 2002. "Aid and Growth in India: Some Evidence from Disaggregated Aid Data," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 3(1), pages 19-48, March.
    21. Mr. Tito Cordella & Mr. Giovanni Dell'Ariccia, 2003. "Budget Support Versus Project Aid," IMF Working Papers 2003/088, International Monetary Fund.
    22. Hansen, Henrik & Tarp, Finn, 2001. "Aid and growth regressions," Journal of Development Economics, Elsevier, vol. 64(2), pages 547-570, April.
    23. Muhammad Arshad Khan & Ayaz Ahmed, 2007. "Foreign Aid-Blessing or Curse: Evidence from Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 46(3), pages 215-240.
    24. D.S. Prasada Rao & Derek D. Headey & Alan Duhs, 2004. "All the Conditions of Effective Foreign Aid," CEPA Working Papers Series WP042004, School of Economics, University of Queensland, Australia.
    25. Mosley, Paul & Hudson, John & Horrell, Sara, 1987. "Aid, the Public Sector and the Market in Less Developed Countries," Economic Journal, Royal Economic Society, vol. 97(387), pages 616-641, September.
    26. Yoel Hecht & Assaf Razin & Nitzan Gad Shinar, 2004. "Interactions between Capital Inflows and Domestic Investment: Israel and Developing Economies," Israel Economic Review, Bank of Israel, vol. 2(2), pages 1-14.
    27. Stefan Koeberle & Zoran Stavreski & Jan Walliser, 2006. "Budget Support as More Effective Aid? Recent Experiences and Emerging Lessons," World Bank Publications - Books, The World Bank Group, number 6958.
    28. Rukmani Gounder, 2001. "Aid-growth nexus: empirical evidence from Fiji," Applied Economics, Taylor & Francis Journals, vol. 33(8), pages 1009-1019.
    29. Isham, Jonathan & Kaufmann, Daniel & Pritchett, Lant H, 1997. "Civil Liberties, Democracy, and the Performance of Government Projects," The World Bank Economic Review, World Bank, vol. 11(2), pages 219-242, May.
    30. Ali, Abdiweli M. & Isse, Hodan Said., 2007. "Foreign aid and free trade and their effect on income: a panel analysis," Journal of Developing Areas, Tennessee State University, College of Business, vol. 41(1), pages 127-142, September.
    31. Muhammad Javid & Abdul Qayyum, 2011. "Foreign Aid and Growth Nexus in Pakistan: The Role of Macroeconomic Policies," PIDE-Working Papers 2011:72, Pakistan Institute of Development Economics.
    32. Steve Radelet, 2006. "A Primer on Foreign Aid," Working Papers 92, Center for Global Development.
    33. George Mavrotas, 2003. "Which Types of Aid Have the Most Impact?," WIDER Working Paper Series DP2003-85, World Institute for Development Economic Research (UNU-WIDER).
    34. Ashok Chakravarti, 2005. "Aid, Institutions and Development," Books, Edward Elgar Publishing, number 3699.
    35. Rati Ram, 2003. "Roles of Bilateral and Multilateral Aid in Economic Growth of Developing Countries," Kyklos, Wiley Blackwell, vol. 56(1), pages 95-110, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Akame, Afuge & Mavrotas, George, 2024. "The differential effects of foreign aid to sub-Saharan Africa," IOB Discussion Papers 2024.01, Universiteit Antwerpen, Institute of Development Policy (IOB).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tony Addison & George Mavrotas & Mark McGillivray, 2005. "Development assistance and development finance: evidence and global policy agendas," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(6), pages 819-836.
    2. Tony Addison & George Mavrotas & Mark McGillivray, 2005. "Aid, Debt Relief and New Sources of Finance for Meeting the Millennium Development Goals," WIDER Working Paper Series RP2005-09, World Institute for Development Economic Research (UNU-WIDER).
    3. Innocent .U. Duru & Bartholomew .O.N. Okafor & Millicent Adanne Eze & Gabriel .O. Ebenyi, 2020. "Foreign Aid and Economic Growth: Empirical Evidence from Nigeria," Growth, Asian Online Journal Publishing Group, vol. 7(1), pages 35-50.
    4. Muhammad Javid & Abdul Qayyum, 2011. "Foreign Aid and Growth Nexus in Pakistan: The Role of Macroeconomic Policies," PIDE-Working Papers 2011:72, Pakistan Institute of Development Economics.
    5. Mark McGillivray, 2005. "Réformer la formule : commentaires.Efficacité de l'aide et régimes de politiques économiques dans les pays receveurs," Revue d’économie du développement, De Boeck Université, vol. 13(2), pages 119-127.
    6. Bwire, Thomas & Lloyd, Tim & Morrissey, Oliver, 2013. "Foreign Aid, Public Sector and Private Consumption: A Cointegrated Vector Autoregressive Approach," WIDER Working Paper Series 094, World Institute for Development Economic Research (UNU-WIDER).
    7. Tony Addison & George Mavrotas & Mark McGillivray, 2005. "Aid to Africa: an unfinished agenda," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(8), pages 989-1001.
    8. Geetilaxmi MOHAPATRA & A. K. GIRI & Madhu SEHRAWAT, 2016. "Foreign aid, macroeconomic policies and economic growth nexus in India: An ARDL bounds testing approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(609), W), pages 183-202, Winter.
    9. Ojiambo Elphas & Jacob Oduor & Mburu Tom & Wawire Nelson, 2015. "Working Paper 226 - Aid Unpredictability and Economic Growth in Kenya," Working Paper Series 2169, African Development Bank.
    10. Mark McGillivray, 2006. "Aid Allocation and Fragile States," WIDER Working Paper Series DP2006-01, World Institute for Development Economic Research (UNU-WIDER).
    11. Derek Headey, 2005. "Foreign Aid and Foreign Policy: How donors undermine the effectiveness of overseas development assistance," CEPA Working Papers Series WP052005, School of Economics, University of Queensland, Australia.
    12. Thomas Bwire & Oliver Morrissey & Tim Lloyd, 2013. "Foreign Aid, Public Sector and Private Consumption: a Cointegrated Vector Autoregressive Approach," WIDER Working Paper Series wp-2013-094, World Institute for Development Economic Research (UNU-WIDER).
    13. Thiele, Rainer & Nunnenkamp, Peter & Dreher, Axel, 2006. "Sectoral aid priorities: Are donors really doing their best to achieve the millennium development goals?," Kiel Working Papers 1266, Kiel Institute for the World Economy (IfW Kiel).
    14. Shagufta Sultana, "undated". "Does Foreign Aid Affect Economic Growth In Pakistan? A Disaggregate Analysis," Review of Socio - Economic Perspectives 201945, Reviewsep.
    15. Akame, Afuge & Mavrotas, George, 2024. "The differential effects of foreign aid to sub-Saharan Africa," IOB Discussion Papers 2024.01, Universiteit Antwerpen, Institute of Development Policy (IOB).
    16. Bazoumana Ouattara & Eric Strobl, 2008. "Aid, Policy and Growth: Does Aid Modality Matter?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(2), pages 347-365, July.
    17. Juliana Yael Milovich, 2017. "The long-term impact of U.S. aid on poverty alleviation: the role of a seat in the Security Council of the United Nations," EconomiX Working Papers 2017-47, University of Paris Nanterre, EconomiX.
    18. Mark McGillivray & Simon Feeny & Niels Hermes & Robert Lensink, 2005. "It Works; It Doesn't; It Can, But that Depends...: 50 Years of Controversy Over the Macroeconomic Impact of Development Aid," WIDER Working Paper Series RP2005-54, World Institute for Development Economic Research (UNU-WIDER).
    19. Geetilaxmi MOHAPATRA & A. K. GIRI & Madhu SEHRAWAT, 2016. "Foreign aid, macroeconomic policies and economic growth nexus in India: An ARDL bounds testing approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(609), W), pages 183-202, Winter.
    20. Mark McGillivray & Simon Feeny & Niels Hermes & Robert Lensink, 2006. "Controversies over the impact of development aid: it works; it doesn't; it can, but that depends …," Journal of International Development, John Wiley & Sons, Ltd., vol. 18(7), pages 1031-1050.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pid:journl:v:57:y:2018:i:2:p:145-174. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Khurram Iqbal (email available below). General contact details of provider: https://edirc.repec.org/data/pideipk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.