NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Aid and Growth: What Does the Cross-Country Evidence Really Show?

Raghuram G. Rajan, Arvind Subramanian

NBER Working Paper No. 11513
Issued in August 2005
NBER Program(s):   IFM

We examine the effects of aid on growth--in cross-sectional and panel data--after correcting for the bias that aid typically goes to poorer countries, or to countries after poor performance. Even after thiscorrection, we find little robust evidence of a positive (or negative) relationship between aid inflows into a country and its economic growth. We also find no evidence that aid works better in better policy or geographical environments, or that certain forms of aid work better than others. Our findings, which relate to the past, do not imply that aid cannot be beneficial in the future. But they

do suggest that for aid to be effective in the future, the aid apparatus will have to be rethought. Our findings raise the question: what aspects of aid offset what ought to be the indisputable growth enhancing effects of resource transfers? Thus, our findings support efforts under way at national and international levels to understand and improve aid effectiveness.

download in pdf format
   (267 K)

email paper

A non-technical summary of this paper is available in the February 2006 NBER digest.  You can sign up to receive the NBER Digest by email.

This paper is available as PDF (267 K) or via email.

This paper was revised on February 26, 2007

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w11513

Published: Raghuram G. Rajan & Arvind Subramanian, 2008. "Aid and Growth: What Does the Cross-Country Evidence Really Show?," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 643-665, 06.

Users who downloaded this paper also downloaded these:
Imbens and Lemieux w13039 Regression Discontinuity Designs: A Guide to Practice
Alesina and Dollar w6612 Who Gives Foreign Aid to Whom and Why?
Boone w5308 Politics and the Effectiveness of Foreign Aid
Easterly, Levine, and Roodman w9846 New Data, New doubts: A Comment on Burnside and Dollar's "Aid, Policies, and Growth" (2000)
Rajan and Subramanian w11657 What Undermines Aid's Impact on Growth?
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us