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Aid and Growth in Small Island Developing States

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  • Simon Feeny
  • Mark McGillivray

Abstract

Aid flows to small island developing states (SIDS) are enormous by international standards when compared to the size of their economies. Yet these countries face many severe economic challenges and many have experienced declines in the living standards of their citizens. This paper looks at the impact of aid on what is treated as a necessary precondition for improvements in living standards, typically defined. Specifically, it examines the impact of foreign aid on real per capita income growth in SIDS by econometrically analysing cross-country data for the period 1980 to 2004. A variety of econometric techniques and measures of aid are used. Results suggest that foreign aid is effective at spurring economic growth but with diminishing returns.

Suggested Citation

  • Simon Feeny & Mark McGillivray, 2010. "Aid and Growth in Small Island Developing States," Journal of Development Studies, Taylor & Francis Journals, vol. 46(5), pages 897-917.
    • Handle: RePEc:taf:jdevst:v:46:y:2010:i:5:p:897-917
    DOI: 10.1080/00220381003623889
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    1. Mark McGillivray & Simon Feeny, 2008. "Aid and Growth in Fragile States," WIDER Working Paper Series RP2008-03, World Institute for Development Economic Research (UNU-WIDER).
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    Cited by:

    1. Unbreen Qayyum, 2013. "Institutional Quality, Conflict and Aid Dependency," PIDE-Working Papers 2013:94, Pakistan Institute of Development Economics.
    2. Angeon, Valérie & Bates, Samuel, 2015. "Reviewing Composite Vulnerability and Resilience Indexes: A Sustainable Approach and Application," World Development, Elsevier, vol. 72(C), pages 140-162.
    3. Munyanyi, Musharavati Ephraim & Awaworyi Churchill, Sefa, 2022. "Foreign aid and energy poverty: Sub-national evidence from Senegal," Energy Economics, Elsevier, vol. 108(C).
    4. Nuruddeen USMAN & Martins.O. APINRAN, 2019. "The Impact of Aid and Macroeconomic Policy on Growth in Nigeria: A Bounds Testing Approach," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(5), pages 581-603, May.
    5. Terence Wood & Sabit Otor & Matthew Dornan, 2022. "Why are aid projects less effective in the Pacific?," Development Policy Review, Overseas Development Institute, vol. 40(3), May.
    6. Bah, El-hadj M. & Ward, Jeremy, 2011. "Effectiveness of foreign aid in Small Island Developing States," MPRA Paper 32062, University Library of Munich, Germany.
    7. Jose L. Diaz‐Sanchez & Abrams M. E. Tagem & Joana Mota, 2022. "Tax revenue effort and aid in fragile states: The case of Comoros," South African Journal of Economics, Economic Society of South Africa, vol. 90(2), pages 175-195, June.
    8. Pierre E. Biscaye & Travis W. Reynolds & C. Leigh Anderson, 2017. "Relative Effectiveness of Bilateral and Multilateral Aid on Development Outcomes," Review of Development Economics, Wiley Blackwell, vol. 21(4), pages 1425-1447, November.
    9. Qayyum, Unbreen & Din, Musleh-ud & Haider, Adnan, 2014. "Foreign aid, external debt and governance," Economic Modelling, Elsevier, vol. 37(C), pages 41-52.
    10. Farah, Bassam & Chakravarty, Dwarka & Dau, Luis & Beamish, Paul W., 2022. "Multinational enterprise parent-subsidiary governance and survival," Journal of World Business, Elsevier, vol. 57(2).
    11. Bandyopadhyay, Subhayu & Lahiri, Sajal & Younas, Javed, 2015. "Financing growth through foreign aid and private foreign loans: Nonlinearities and complementarities," Journal of International Money and Finance, Elsevier, vol. 56(C), pages 75-96.
    12. Feeny, Simon & Iamsiraroj, Sasi & McGillivray, Mark, 2014. "Growth and Foreign Direct Investment in the Pacific Island countries," Economic Modelling, Elsevier, vol. 37(C), pages 332-339.
    13. Harb, Nermeen & Hall, Stephen G., 2019. "Does foreign aid play a role in the maintenance of economic growth? A non-linear analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 73(C), pages 192-204.
    14. Feeny, Simon & de Silva, Ashton, 2012. "Measuring absorptive capacity constraints to foreign aid," Economic Modelling, Elsevier, vol. 29(3), pages 725-733.

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