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The Effectiveness of International Aid: A Generalized Propensity Score Analysis

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  • Liu, Jing
  • Florax, Raymond

Abstract

Applying the generalized propensity score matching, we estimate the effect of international aid on country GDP growth based on a panel data of 73 aid recipient countries for the period 1960-2011. The matching permits us to select a set of country-year observations that to the largest extent resemble each other, thus substantially reducing the bias caused by cross-country heterogeneity. Another advantage of this analysis is that we provide the effect of aid over a continuous range of aid-receiving intensities, rather than estimating a single average effect. The does-response function appears to be a more precise description of the effectiveness of aid on development when there exists a nonlinear relationship between the two. We find a slightly concave increasing response of economic growth to international aid intensity. The optimal ratio of aid to country GDP is found to be about 6 percent, which corresponds to a 2 percent increment in country GDP growth rate.

Suggested Citation

  • Liu, Jing & Florax, Raymond, 2014. "The Effectiveness of International Aid: A Generalized Propensity Score Analysis," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169804, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea14:169804
    DOI: 10.22004/ag.econ.169804
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    References listed on IDEAS

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    2. Sylvester Amoako Agyemang & Tomáš Ratinger & Miroslava Bavorová, 2022. "The Impact of Agricultural Input Subsidy on Productivity: The Case of Ghana," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(3), pages 1460-1485, June.
    3. Ruth T. Chepchirchir & Ibrahim Macharia & Alice W. Murage & Charles A. O. Midega & Zeyaur R. Khan, 2017. "Impact assessment of push-pull pest management on incomes, productivity and poverty among smallholder households in Eastern Uganda," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 9(6), pages 1359-1372, December.

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