Is Aid Efficient?

Audrey Menard and Laurent Weill

Revue d'économie politique, 2014, vol. 124, issue 4, 613-624

Abstract: The aim of this paper is to investigate the relation between aid and macroeconomic efficiency. It contributes to the understanding of the puzzling aid-growth linkage. We apply a stochastic frontier approach to estimate macroeconomic efficiency for a panel of 67 countries over the period 1985?2010. We use GMM dynamic panel techniques to analyse the relation between aid and macroeconomic efficiency. We find that aid fosters efficiency. This beneficial effect is found for bilateral aid and multilateral aid. We also show that the favourable impact of aid on efficiency increases with the extent of democracy and the macroeconomic stability of recipient countries.

Keywords: Aid; Stochastic frontier approach (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:cai:repdal:redp_244_0613

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