Aid and Growth at the Regional Level

Axel Dreher and Steffen Lohmann

No 2015/196, IMF Working Papers from International Monetary Fund

Abstract: This paper brings the aid effectiveness debate to the sub-national level. We hypothesize the nonrobust results regarding the effects of aid on development in the previous literature to arise due to the effects of aid being insufficiently large to measurably affect aggregate outcomes. Using geocoded data for World Bank aid to a maximum of 2,221 first-level administrative regions (ADM1) and 54,167 second-level administrative regions (ADM2) in 130 countries over the 2000-2011 period, we test whether aid affects development, measured as nighttime light growth. Our preferred identification strategy exploits variation arising from interacting a variable that indicates whether or not a country has passed the threshold for receiving IDA's concessional aid with a recipient region's probability to receive aid, in a sample of 478 ADM1 regions and almost 8,400 ADM2 regions from 21 countries. Controlling for the levels of the interacted variables, the interaction provides a powerful and excludable instrument. Overall, we find significant correlations between aid and growth in ADM2 regions, but no causal effects.

Keywords: WP; effect of aid; IDA-threshold effect; level of significance; term growth-effect; Aid Effectiveness; Geo-coding; World Bank; rainfall growth; aid-growth regression; growth OLS; IDA threshold; Agroindustries; Personal income; Population growth; Africa; Central Asia; South Asia; Global (search for similar items in EconPapers)
Pages: 40
Date: 2015-09-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (90)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=43247 (application/pdf)

Related works:
Journal Article: Aid and growth at the regional level (2015)
Working Paper: Aid and Growth at the Regional Level (2015)
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:imf:imfwpa:2015/196

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().