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Aid and growth. New evidence using an excludable instrument

Sarah Langlotz and Axel Dreher ()

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

Abstract: We use an excludable instrument to test the effect of foreign aid on economic growth, in a sample of 73 countries over the 1966-2009 period. We interact donors legislature fractionalization with a recipient country s probability to receive aid. The results show fractionalization to increase donors aid budgets, representing the over-time variation of our instrument, while the probability to receive aid introduces variation across recipient countries. Controlling for country- and period-specific effects that absorb the levels of the interacted variables, the interaction provides a powerful and excludable instrument. Making use of this instrument, our results show that aid increases growth.

JEL-codes: O19 O11 F35 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-dev and nep-gro
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https://www.econstor.eu/bitstream/10419/112878/1/VfS_2015_pid_790.pdf (application/pdf)

Related works:
Journal Article: Aid and growth: New evidence using an excludable instrument (2020) Downloads
Working Paper: Aid and growth.New evidence using an excludable instrument (2017) Downloads
Working Paper: Aid and Growth. New Evidence Using an Excludable Instrument (2015) Downloads
Working Paper: Aid and growth. New evidence using an excludable instrument (2015) Downloads
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