Aid and Growth: What Does the Cross-Country Evidence Really Show?
We examine the effects of aid on growth in cross-sectional and panel data—after correcting for the possible bias that poorer (or stronger) growth may draw aid contributions to recipient countries. Even after this correction, 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 suggest that for aid to be effective in the future, the aid apparatus will have to be rethought.
We are grateful to Chris Adam, Andy Berg, Nancy Birdsall, Oya Celasun, Ajay Chhibber, Michael Clemens, Tito Cordella, Graham Hacche, Nurul Islam, Simon Johnson, Sendhil Mullainathan, Jonathan Ostry, Alessandro Prati, Lant Pritchett, Steve Radelet, Rodney Ramcharan, David Roodman, Marta Ruiz-Arranz, Thierry Tressel, and especially Aart Kraay and two anonymous referees for helpful comments. Manzoor Gill and Ioannis Tokatlidis provided superb research assistance. This paper reflects the authors' views and not necessarily those of the International Monetary Fund, its management, or its Executive Board.
- ... regardless of the situation -- for example, in countries that have adopted sound economic policies or improved government...
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. citation courtesy of