The Effects of Foreign Aid in Sub-Saharan Africa

Robert Gillanders

No 201116, Working Papers from School of Economics, University College Dublin

Abstract: This paper contributes to the aid effectiveness debate by applying a vector autoregression model to a panel of Sub-Saharan African countries. This method avoids the need for instrumental variables and allows one to analyse the impact of foreign aid on human development and on economic development simultaneously. The full sample results indicate a small increase in economic growth following a fairly substantial aid shock. The size of the effect puts the result somewhere between the arguments of aid optimists and those of aid pessimists. Economic growth is found to respond more to aid shocks in groups defined by better economic policies, poor institutions and high aid dependence. Human development, for which I use the growth rate of life expectancy as a proxy, responds positively to aid shocks in democracies and in good institutional environments.

Keywords: Foreign aid; Official Development Assistance (ODA); Economic development; Human development (search for similar items in EconPapers)
Date: 2011-08
New Economics Papers: this item is included in nep-afr and nep-dev
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Citations: View citations in EconPapers (10)

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http://hdl.handle.net/10197/6374 First version, 2011 (application/pdf)

Related works:
Journal Article: The Effects of Foreign Aid in Sub-Saharan Africa (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ucn:wpaper:201116

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