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

Pablo Selaya

No 03/2005, Development Research Working Paper Series from Institute for Advanced Development Studies

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.

Keywords: Foreign Aid; cross-country; conditionality (search for similar items in EconPapers)
JEL-codes: F35 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2005-11
New Economics Papers: this item is included in nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:adv:wpaper:200503

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