Is Foreign Aid Beneficial for Sub-Saharan Africa? A Panel Data Analysis

Stephen Armah and Carl H. Nelson

No 6356, 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: Significant ambiguity surrounds the magnitude and sign of the effect of foreign aid on economic growth. Foreign aid can potentially augment scarce domestic capital to spur growth but foreign aid can also remove positive incentive to build wealth, stalling growth. This paper characterizes the effect of foreign aid on the growth of Sub-Saharan African countries after correcting endogeneity problems that plague the estimation. Foreign aid is found to be growth promoting given good governance and using fixed effects in a static panel framework. Data from twenty-one Sub-Saharan African countries spanning 1995-2003 was used in the estimation. The finding of a significant foreign aid-growth relationship is pertinent because it suggests that increased aid to Sub Saharan Africa is one way to achieve the UN’s Millennium goals. By lobbying for increased foreign aid, advocates are prescribing a necessary albeit insufficient medicine for Sub Saharan Africa’s economic problems.

Keywords: Food Security and Poverty (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr and nep-dev
Date: 2008
View list of references

Downloads: (external link)
http://purl.umn.edu/6356 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ags:aaea08:6356

Access Statistics for this paper

More papers in 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)
Contact information at EDIRC.
Series data maintained by AgEcon Search ().