Aid and growth: Asymmetric effects?

Leo Doerr ()
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Leo Doerr: Chair for Economic Policy, University of Hamburg

No 76, Working Papers from Chair for Economic Policy, University of Hamburg

Abstract: : This paper provides new empirical findings on the aid-growth relation. We find evidence for considerable asymmetry in the aid-growth relation; i.e., aid cuts have a large negative impact on economic activity, while increasing aid may be ineffective in promoting growth. Development aid thus largely replaces rather than complements domestic resources. We innovate by combining dynamic generalized method of moments techniques with asymmetric effect analysis. Unlike previous studies in this area, our empirical design allows us to account for potential weak instrument problems and endogeneity concerns when estimating the effects of aid upturns and downturns separately.

Pages: 19 pages
Date: 2024-03-22
New Economics Papers: this item is included in nep-dev and nep-fdg
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Published in Hamburg Contemporary Economic Discussions, Issue 76, 2024

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Persistent link: https://EconPapers.repec.org/RePEc:hce:wpaper:076

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