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Does aid cause changes in economic freedom?

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  • Jamie Bologna Pavlik
  • Benjamin Powell
  • Andrew T. Young

Abstract

We examine whether aid affects recipient countries' economic freedom. The existing empirical literature examining this relationship has found conflicting results. However, all of these existing studies have struggled to employ plausible identification strategies to find a causal relationship between aid and economic freedom. Our study employs matching methods to better estimate the causal relationship between aid and economic freedom. We find that there is no meaningful causal impact of overall aid on recipient countries' economic freedom. There is some evidence that, specifically, large and sustained increases in “governance‐specific” aid lead to increases in economic freedom, but even then the effects appear to be quantitatively modest.

Suggested Citation

  • Jamie Bologna Pavlik & Benjamin Powell & Andrew T. Young, 2022. "Does aid cause changes in economic freedom?," Southern Economic Journal, John Wiley & Sons, vol. 89(1), pages 90-111, July.
    • Handle: RePEc:wly:soecon:v:89:y:2022:i:1:p:90-111
    DOI: 10.1002/soej.12587
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    References listed on IDEAS

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    Cited by:

    1. Callais, Justin T. & Young, Andrew T., 2023. "A rising tide that lifts all boats: An analysis of economic freedom and inequality using matching methods," Journal of Comparative Economics, Elsevier, vol. 51(3), pages 744-777.
    2. Heckelman, Jac C & Wilson, Bonnie, 2023. "Aid, Reform, and Interest Groups," MPRA Paper 118182, University Library of Munich, Germany.
    3. Dreher, Axel & Lang, Valentin & Reinsberg, Bernhard, 2024. "Aid effectiveness and donor motives," World Development, Elsevier, vol. 176(C).
    4. Ryan H. Murphy, 2023. "Stefon Dercon: Gambling on development: Why some countries win and others lose. London: Hurst, 2022. 398 pages. USD $34.95 (hardback)," Public Choice, Springer, vol. 196(1), pages 217-222, July.

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