Your development or mine? Effects of donor–recipient cultural differences on the aid-growth nexus
Journal of Comparative Economics, 2016, vol. 44, issue 2, pages 309-325
Development aid from the West may lead to adverse growth effects in the global South due to the neglected cultural differences between development aid (paradigm) providers and recipients. I test this hypothesis empirically by augmenting an aid-growth model with proxy variables for cultural differences between donors and recipients. First, I use donor–recipient genetic distance, i.e., blood types, to capture the traditional way of cultural transmission. Second, I use western education of recipient country leaders to capture resource-based transmission of culture. Results of the OLS panel estimation in first differences show that a one unit increase in donor–recipient genetic distance reduces the main effect of aid on growth by 0.2 percentage points when aid is increased by one percentage point. In turn, a one percentage point increase in aid yields on average a 0.3 percentage point increase in growth after a decade for countries with western educated leaders.
Keywords: Aid effectiveness; Cultural differences; Genetic distance; Western education (search for similar items in EconPapers)
JEL-codes: O11 O19 (search for similar items in EconPapers)
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Persistent link: http://EconPapers.repec.org/RePEc:eee:jcecon:v:44:y:2016:i:2:p:309-325
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