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Types of Foreign Aid

In: Lessons on Foreign Aid and Economic Development

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  • Christian Bjørnskov

    (Aarhus University)

Abstract

Most studies treat aid flows as a unitary concept with a standard result that aid does not affect long-run economic growth or development. This chapter argues that the standard finding may be misleading if different types of aid have different effects. To alleviate this problem, I use factor analysis to separate aid flows into different types observed in the data, interpretable as aid for economic purposes, social purposes, and a smaller category consisting of reconstruction aid; a residual category covering approximately 2% of all aid captures the remaining purposes. Estimating the growth effects of separable types of aid suggests reconstruction aid has direct and sizeable positive effects. Aid for economic, social or residual purposes has no significant effects.

Suggested Citation

  • Christian Bjørnskov, 2019. "Types of Foreign Aid," Springer Books, in: Nabamita Dutta & Claudia R. Williamson (ed.), Lessons on Foreign Aid and Economic Development, chapter 0, pages 33-61, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-22121-8_3
    DOI: 10.1007/978-3-030-22121-8_3
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    References listed on IDEAS

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    1. Bjørnskov, Christian & Schröder, Philipp J.H., 2013. "Are debt repayment incentives undermined by foreign aid?," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1073-1091.
    2. Felicitas Nowak‐Lehmann & Axel Dreher & Dierk Herzer & Stephan Klasen & Inmaculada Martínez‐Zarzoso, 2012. "Does foreign aid really raise per capita income? A time series perspective," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(1), pages 288-313, February.
    3. Bjørnskov, Christian, 2010. "Do elites benefit from democracy and foreign aid in developing countries?," Journal of Development Economics, Elsevier, vol. 92(2), pages 115-124, July.
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    Cited by:

    1. Axel Dreher & Steffen Lohmann, 2015. "Aid and growth at the regional level," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 31(3-4), pages 420-446.
    2. Axel Dreher & Vera Eichenauer & Kai Gehring & Vera Z. Eichenauer, 2013. "Geopolitics, Aid and Growth," CESifo Working Paper Series 4299, CESifo.
    3. Dreher, Axel & Minasyan, Anna & Nunnenkamp, Peter, 2015. "Government ideology in donor and recipient countries: Does ideological proximity matter for the effectiveness of aid?," European Economic Review, Elsevier, vol. 79(C), pages 80-92.
    4. Axel Dreher & Sarah Langlotz, 2020. "Aid and growth: New evidence using an excludable instrument," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(3), pages 1162-1198, August.
    5. Dutta, Nabamita & Williamson, Claudia R., 2016. "Aiding economic freedom: Exploring the role of political institutions," European Journal of Political Economy, Elsevier, vol. 45(S), pages 24-38.
    6. Axel Dreher & Vera Z Eichenauer & Kai Gehring, 2018. "Geopolitics, Aid, and Growth: The Impact of UN Security Council Membership on the Effectiveness of Aid," The World Bank Economic Review, World Bank, vol. 32(2), pages 268-286.
    7. Young, Andrew T. & Sheehan, Kathleen M., 2014. "Foreign aid, institutional quality, and growth," European Journal of Political Economy, Elsevier, vol. 36(C), pages 195-208.
    8. Eichenauer, Vera Z. & Fuchs, Andreas & Kunze, Sven & Strobl, Eric, 2020. "Distortions in aid allocation of United Nations flash appeals: Evidence from the 2015 Nepal earthquake," World Development, Elsevier, vol. 136(C).
    9. Axel Dreher & Valentin F. Lang & Sebastian Ziaja, 2017. "Foreign Aid in Areas of Limited Statehood," CESifo Working Paper Series 6340, CESifo.
    10. Fuchs, Andreas & Richert, Katharina, 2018. "Development Minister Characteristics and Aid Giving," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 53, pages 186-204.
    11. Fuchs, Andreas & Richert, Katharina, 2015. "Do Development Minister Characteristics Affect Aid Giving?," Working Papers 0604, University of Heidelberg, Department of Economics.
    12. Gehring, Kai & Michaelowa, Katharina & Dreher, Axel & Spörri, Franziska, 2017. "Aid Fragmentation and Effectiveness: What Do We Really Know?," World Development, Elsevier, vol. 99(C), pages 320-334.

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    More about this item

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • F35 - International Economics - - International Finance - - - Foreign Aid

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