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To aid or not to aid: Foreign aid and productivity in cross-country regressions

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  • Pablo Selaya

    (University of Copenhagen)

Abstract

The paper reexamines empirically the robustness of competing theories of foreign aid effectiveness. By shifting the focus from the effects of aid on income to effects of aid on productivity, it is possible to put to test 3 existing theories of foreign aid effectiveness. The results provide support for the hypotheses that (i) aid has a positive effect in fostering growth of average productivity, (ii) aid doesn't operate with diminishing returns, and (iii) the magnitude of the total effect depends on climate-related circumstances. The results support the policy recommendation previously made in the literature to seriously reconsider the conditionality rule for foreign aid disbursements.

Suggested Citation

  • Pablo Selaya, 2005. "To aid or not to aid: Foreign aid and productivity in cross-country regressions," Development Research Working Paper Series 03/2005, Institute for Advanced Development Studies.
    • Handle: RePEc:adv:wpaper:200503
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    File URL: http://www.inesad.edu.bo/pdf/wp03_2005.pdf
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    References listed on IDEAS

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    1. Durlauf, Steven N. & Johnson, Paul A. & Temple, Jonathan R.W., 2005. "Growth Econometrics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.),Handbook of Economic Growth, edition 1, volume 1, chapter 8, pages 555-677, Elsevier.
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    Cited by:

    1. Muhammad Nayaz & Javed Husain, 2013. "Pakistan’s Monetary Aid Concerns," South Asian Journal of Management Sciences (SAJMS), Iqra University, Iqra University, vol. 7(1), pages 31-34, Spring.

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    More about this item

    Keywords

    Foreign Aid; cross-country; conditionality;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid

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