EconPapers    
Economics at your fingertips  
 

Government Policy and the Effectiveness of Foreign Aid

Robert Murphy () and Nicholas Tresp
Additional contact information
Nicholas Tresp: UBS Investment Bank

No 647, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: This paper reconsiders the role of economic policy in determining the effectiveness of foreign aid for generating economic growth in developing countries. We update and modify the data set originally used by Burnside and Dollar (2000) in order to more fully consider the critique presented by Easterly et al. (2004). Our findings suggest that the relationship among foreign aid, government policy, and economic growth is tenuous and depends importantly on the subset of countries included in the analysis. Good policy enhances the effectiveness of foreign aid in spurring growth when we use the original set of countries included in Burnside and Dollar, but this relationship disappears for an expanded set of countries. Because the relationship among aid, policy, and growth is likely to be nonlinear, we present an alternative probit model emphasizing growth thresholds. Our results from this alternative analysis confirm the conclusions of Easterly et al., finding little support for the view that good policy increases the probability that foreign aid contributes to growth.

Keywords: foreign aid; economic development; economic growth; government policy; development assistance (search for similar items in EconPapers)
JEL-codes: O11 O23 F43 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2006-08-09, Revised 2006-08-29
New Economics Papers: this item is included in nep-afr and nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed

Downloads: (external link)
http://fmwww.bc.edu/EC-P/wp647.pdf main text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:647

Access Statistics for this paper

More papers in Boston College Working Papers in Economics from Boston College Department of Economics Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F Baum ().

 
Page updated 2020-03-29
Handle: RePEc:boc:bocoec:647