Help or hindrance? U.S. aid on growth

Myongjin Kim and Leilei Shen

Applied Economics Letters, 2020, vol. 27, issue 21, 1746-1753

Abstract: We distinguish between U.S. aid and non-U.S. aid and study the effects on growth in recipient countries. Our analysis exploits time variation in aid due to changes in the supply of U.S. aid and cross-sectional variation in a country’s tendency to receive any U.S. aid. We find that U.S. aid has a positive effect on growth. In particular, U.S. economic aid has a positive effect on growth while U.S. military and food aid have no effect on growth. There is also no evidence of U.S. aid crowding out aid from other countries. The effect of U.S. aid on growth is smaller for countries that are well endowed with natural resources, less ethnically polarized, and more aligned with the U.S.

Date: 2020
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DOI: 10.1080/13504851.2020.1720902

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