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What Is the Aggregate Economic Rate of Return to Foreign Aid?

Channing Arndt (), Sam Jones and Finn Tarp ()

World Bank Economic Review, 2016, vol. 30, issue 3, 446-474

Abstract: In recent years, academic studies have been converging towards the view that foreign aid promotes aggregate economic growth. We employ a simulation approach to: (i) validate the coherence of empirical aid-growth studies published since 2008; and (ii) calculate plausible ranges for the rate of return to aid. Our results highlight the long run nature of aid-financed investments and the importance of channels other than accumulation of physical capital. We find the return to aid lies in ranges commonly accepted for public investments and there is little to justify the view that aid has had a significant pernicious effect on productivity.

JEL-codes: E1 O11 O41 (search for similar items in EconPapers)
Date: 2016
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Working Paper: What is the Aggregate Economic Rate of Return to Foreign Aid? (2014) Downloads
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