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Aid and Growth: Have We Come Full Circle?

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

No WIDER Discussion Paper 2009-05, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: The micro-macro paradox has been revived. Despite broadly positive evaluations at the micro and meso-levels, recent literature has turned decidedly pessimistic with respect to the ability of foreign aid to foster economic growth. Policy implications, such as the complete cessation of aid to Africa, are being drawn on the basis of fragile evidence. This paper first assesses the aid-growth literature with a focus on recent contributions. The aid-growth literature is then framed, for the first time, in terms of the Rubin Causal Model, applied at the macroeconomic level. Our results show that aid has a positive and statistically significant causal effect on growth over the long run with point estimates at levels suggested by growth theory. We conclude that aid remains an important tool for enhancing the development prospects of poor nations.

Keywords: foreign aid; growth; aid effectiveness; causal effects (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fdg
Date: 2009
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Related works:
Working Paper: Aid and Growth Have We Come Full Circle? (2010) Downloads
Working Paper: Aid and Growth: Have We Come Full Circle? (2009) Downloads
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