IDEAS home Printed from https://ideas.repec.org/a/spr/revint/v16y2021i3d10.1007_s11558-020-09408-8.html
   My bibliography  Save this article

Foreign aid, human capital accumulation and the potential implications for growth

Author

Listed:
  • Jamelia Harris

    (University of Warwick)

Abstract

Previous research has explored various channels in the aid-growth relationship such as the real exchange rate, changes in manufacturing output, institutional capacity, and governance. This paper puts forward a new mechanism: human capital accumulation. International organizations financially support and/or directly collaborate with educational institutions to establish courses. The development sector, borne out of aid, demands skilled workers. The workforce in turn develops human capital to meet this demand. There is a consequent change in the skills composition in the host country, and thus the types of skills available to employers in the labor market. This may have implications for long-run growth. These mechanisms are explored through mixed-methods analysis of human capital accumulation at the tertiary level in Sierra Leone, a small low-income, aid-dependent country. The data show that post-war interventions have given rise to courses that develop skills that are demanded by local and international non-governmental organizations, but not the formal private sector. This shift toward development-type qualifications has led to excess supply of these graduates, alongside a shortage of graduates with training in science, technology, engineering, and mathematics. The latter are highly demanded by the private sector.

Suggested Citation

  • Jamelia Harris, 2021. "Foreign aid, human capital accumulation and the potential implications for growth," The Review of International Organizations, Springer, vol. 16(3), pages 549-579, July.
    • Handle: RePEc:spr:revint:v:16:y:2021:i:3:d:10.1007_s11558-020-09408-8
    DOI: 10.1007/s11558-020-09408-8
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11558-020-09408-8
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11558-020-09408-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Rafael La Porta & Andrei Shleifer, 2014. "Informality and Development," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 109-126, Summer.
    2. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    3. Benjamin F. Jones, 2014. "The Human Capital Stock: A Generalized Approach," American Economic Review, American Economic Association, vol. 104(11), pages 3752-3777, November.
    4. Mumtaz Hussain & Andrew Berg & Shekhar Aiyar, 2009. "The Macroeconomic Management of Increased Aid: Policy Lessons from Recent Experience," Review of Development Economics, Wiley Blackwell, vol. 13(3), pages 491-509, August.
    5. Rajan, Raghuram G. & Subramanian, Arvind, 2011. "Aid, Dutch disease, and manufacturing growth," Journal of Development Economics, Elsevier, vol. 94(1), pages 106-118, January.
    6. Philip Michael Kargbo & Kunal Sen, 2014. "Aid Categories that Foster Pro‐Poor Growth: The Case of Sierra Leone," African Development Review, African Development Bank, vol. 26(2), pages 416-429, June.
    7. William Easterly, 2002. "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262550423, April.
    8. François Bourguignon & Mark Sundberg, 2007. "Aid Effectiveness – Opening the Black Box," American Economic Review, American Economic Association, vol. 97(2), pages 316-321, May.
    9. Pablo Yanguas, 2017. "The Role and Responsibility of Foreign Aid in Recipient Political Settlements," Journal of International Development, John Wiley & Sons, Ltd., vol. 29(2), pages 211-228, March.
    10. Gary S. Becker, 1964. "Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education, First Edition," NBER Books, National Bureau of Economic Research, Inc, number beck-5.
    11. Gang Liu & Barbara M. Fraumeni, 2020. "A Brief Introduction to Human Capital Measures," NBER Working Papers 27561, National Bureau of Economic Research, Inc.
    12. Tseday Jemaneh Mekasha & Finn Tarp, 2019. "A Meta-Analysis of Aid Effectiveness: Revisiting the Evidence," Politics and Governance, Cogitatio Press, vol. 7(2), pages 5-28.
    13. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    14. Lin, Tin-Chun, 2004. "The role of higher education in economic development: an empirical study of Taiwan case," Journal of Asian Economics, Elsevier, vol. 15(2), pages 355-371, April.
    15. Liu, Gang & Fraumeni, Barbara M., 2020. "A Brief Introduction to Human Capital Measures," IZA Discussion Papers 13494, Institute of Labor Economics (IZA).
    16. Khan, Mohsin S. & Reinhart, Carmen M., 1990. "Private investment and economic growth in developing countries," World Development, Elsevier, vol. 18(1), pages 19-27, January.
    17. Brautigam, Deborah A & Knack, Stephen, 2004. "Foreign Aid, Institutions, and Governance in Sub-Saharan Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 52(2), pages 255-285, January.
    18. repec:bla:rdevec:v:13:y:2009:i:s1:p:491-509 is not listed on IDEAS
    19. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-848, December.
    20. Raghuram Rajan & Arvind Subramanian, 2007. "Does Aid Affect Governance?," American Economic Review, American Economic Association, vol. 97(2), pages 322-327, May.
    21. World Bank, 2013. "Republic of Sierra Leone : Higher and Tertiary Education Sector Policy Note," World Bank Publications - Reports 16787, The World Bank Group.
    22. Gemmell, Norman, 1996. "Evaluating the Impacts of Human Capital Stocks and Accumulation on Economic Growth: Some New Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(1), pages 9-28, February.
    23. Jac C. Heckelman & Stephen Knack, 2009. "Aid, Economic Freedom, And Growth," Contemporary Economic Policy, Western Economic Association International, vol. 27(1), pages 46-53, January.
    24. Steve Radelet, 2006. "A Primer on Foreign Aid," Working Papers 92, Center for Global Development.
    25. Romer, Paul M., 1990. "Human capital and growth: Theory and evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 251-286, January.
    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. Philip Keefer & Christopher Kilby, 2021. "Introduction to the special issue: In memoriam Stephen Knack," The Review of International Organizations, Springer, vol. 16(3), pages 473-493, July.
    2. Haldar, Anasuya & Sethi, Narayan, 2022. "Effect of sectoral foreign aid allocation on growth and structural transformation in sub-Saharan Africa—Analysing the roles of institutional quality and human capital," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 1010-1026.

    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. Temple, Jonathan R.W., 2010. "Aid and Conditionality," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4415-4523, Elsevier.
    2. Wößmann, Ludger, 2000. "Specifying Human Capital: A Review, Some Extensions, and Development Effects," Kiel Working Papers 1007, Kiel Institute for the World Economy (IfW Kiel).
    3. Mutiu Abimbola Oyinlola & Abdulfatai Adedeji, 2019. "Human capital, financial sector development and inclusive growth in sub-Saharan Africa," Economic Change and Restructuring, Springer, vol. 52(1), pages 43-66, February.
    4. Jinzhao Chen, 2015. "Interprovincial Competitiveness and Economic Growth: Evidence from Chinese Provincial Data (1992–2008)," Pacific Economic Review, Wiley Blackwell, vol. 20(3), pages 388-414, August.
    5. Stephen G. Zimmer, 2023. "Rethinking the role of human Capital in Growth Models," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 36(4), pages 567-588, December.
    6. Sin-Yu Ho & Bernard Njindan Iyke, 2020. "The Determinants of Economic Growth in Ghana: New Empirical Evidence," Global Business Review, International Management Institute, vol. 21(3), pages 626-644, June.
    7. Markus Eberhardt & Francis Teal, 2010. "Aggregation versus Heterogeneity in Cross-Country Growth Empirics," CSAE Working Paper Series 2010-32, Centre for the Study of African Economies, University of Oxford.
    8. Sivropoulos-Valero, Anna Alexandra, 2021. "Education and economic growth," LSE Research Online Documents on Economics 114434, London School of Economics and Political Science, LSE Library.
    9. Anna Valero, 2021. "Education and economic growth," POID Working Papers 006, Centre for Economic Performance, LSE.
    10. Zwane, Talent & Biyase, Mduduzi & Binda, Thandolwethu, 2021. "Institutions and Technical Efficiency: A Stochastic Frontier Approach," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 74(4), pages 415-438.
    11. Sebastian Edwards, 2015. "Economic Development and the Effectiveness of Foreign Aid: A Historical Perspective," Kyklos, Wiley Blackwell, vol. 68(3), pages 277-316, August.
    12. Jinzhao Chen, 2012. "Real Exchange Rate and Economic Growth: Evidence from Chinese Provincial Data (1992 - 2008)," PSE Working Papers halshs-00667467, HAL.
    13. Anna Valero, 2021. "Education and economic growth," CEP Discussion Papers dp1764, Centre for Economic Performance, LSE.
    14. Eric A. Hanushek & Ludger Woessmann, 2008. "The Role of Cognitive Skills in Economic Development," Journal of Economic Literature, American Economic Association, vol. 46(3), pages 607-668, September.
    15. Arndt, Channing & Jones, Sam & Tarp, Finn, 2015. "Assessing Foreign Aid’s Long-Run Contribution to Growth and Development," World Development, Elsevier, vol. 69(C), pages 6-18.
    16. Josef L. Loening, 2004. "Time series evidence on education and growth: the case of Guatemala, 1951-2002," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 19(2), pages 3-40, December.
    17. Verberi, Can & Yasar, Sema & Sugozu, Ibrahim Halil, 2023. "Capital liberalization, growth and moral hazard: Lessons from the global financial crisis," International Review of Financial Analysis, Elsevier, vol. 90(C).
    18. Michelle Baddeley & Kirsty McNay & Robert Cassen, 2006. "Divergence in India: Income differentials at the state level, 1970-97," Journal of Development Studies, Taylor & Francis Journals, vol. 42(6), pages 1000-1022.
    19. repec:zbw:rwidps:0030 is not listed on IDEAS
    20. Kar, Sabyasachi & Pritchett, Lant & Raihan, Selim & Sen, Kunal, 2013. "Looking for a break: Identifying transitions in growth regimes," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 151-166.
    21. Vos, Rob & Frenkel, Roberto & Ocampo, José Antonio & Palma, José Gabriel & Marfán, Manuel & Ros, Jaime & Taylor, Lance & Correa, Nelson & Cimoli, Mario, 2005. "Beyond Reforms: Structural Dynamics and Macroeconomic Vulnerability," IDB Publications (Books), Inter-American Development Bank, number 347, November.

    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:spr:revint:v:16:y:2021:i:3:d:10.1007_s11558-020-09408-8. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.