Does development aid help poor countries converge to our standard of living?

Tryggvi Herbertsson (tryggvi@taurus.is) and Martin Paldam

Nationaløkonomisk tidsskrift, 2007, vol. 2007, issue 1, 188-214

Abstract: Aid flows are included in the standard convergence equation and estimated using cross-country, panel and GMM regression. Robustness of the result is tested by changing the model and by adding extra variables. The main results are: that absolute convergence and absolute aid effectiveness are both rejected, and conditional convergence is accepted. Aid has an activity effect in the short run, but conditional aid effectiveness is found to be dubious. Finally, we try to divide the countries into an A-group where aid is effective and a B-group where it harms. Several criteria for division are explored, but none are really successful – the most satisfactory is the one that divides countries according to income.

Keywords: poverty; aid (search for similar items in EconPapers)
JEL-codes: A10 (search for similar items in EconPapers)
Date: 2007
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