Aid, Dutch Disease, and Manufacturing Growth

Raghuram Rajan and Arvind Subramanian

No 196, Working Papers from Center for Global Development

Abstract: We examine the effects of aid on the growth of manufacturing, using a methodology that exploits the variation within countries and across manufacturing sectors, and corrects for possible reverse causality. We find that aid inflows have systematic adverse effects on a country’s competitiveness, as reflected in the lower relative growth rate of exportable industries. We provide some evidence suggesting that the channel for these effects is the real exchange rate appreciation caused by aid inflows. We conjecture that this may explain, in part, why it is hard to find robust evidence that foreign aid helps countries grow.

Keywords: manufacturing; economic development; dutch disease; cgd; center for global development (search for similar items in EconPapers)
Pages: 39 pages
Date: 2009-12
New Economics Papers: this item is included in nep-dev and nep-fdg
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Citations: View citations in EconPapers (24)

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Related works:
Working Paper: Aid, Dutch Disease, and Manufacturing Growth (2014)
Journal Article: Aid, Dutch disease, and manufacturing growth (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:cgd:wpaper:196

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