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Foreign aid and growth: A Sp P-VAR analysis using satellite sub-national data for Uganda

Andrea Civelli (), Andrew Horowitz and Arilton Teixeira

Journal of Development Economics, 2018, vol. 134, issue C, 50-67

Abstract: We develop a measurement strategy for the impact of foreign aid based on a regional spatial panel vector-autoregressive model (Sp P-VAR). We illustrate the strategy using Ugandan districts. Data for the regional units (ADM2) is assembled combining satellite sources for socio-economic activity, geo-located aid disbursements, and traditional household surveys. We find statistically significant positive and persistent effects of aid shocks on nighttime luminosity. Mapping nightlights to economic activity, the results suggest that the economic magnitude of these effects is small, but significant – with a multiplier between 4 and 5 in the long-run. The VAR addresses endogeneity concerns associated with non-random aid assignment.

Keywords: Official development assistance; Aid impact; Regional economic growth and development; Satellite nighttime luminosity; Spatial panel VAR (search for similar items in EconPapers)
JEL-codes: R11 R2 O11 O12 O22 O55 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.jdeveco.2018.05.001

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