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Economic Development and the Effectiveness of Foreign Aid: A Historical Perspective

Sebastian Edwards

NBER Working Paper No. 20685
Issued in November 2014
NBER Program(s):International Finance and Macroeconomics

In this paper I discuss the effectiveness of foreign aid from a historical perspective. I show that foreign aid is a relatively new concept in economics, and I emphasize the role of exchange rate policies in the foreign aid controversies of the 1970s through 1990s. I show that in the early 1980s there were major changes in views regarding aid and agriculture. I emphasize the role of “ownership” of aid programs by the recipient countries as a way of increasing effectiveness. I argue that there is little hope of making progress in these debates if the economics profession continues to rely, almost exclusively, on cross section regressions. In order to move forward, these analyses need to be supplemented by in depth case studies that follow a country’s history for many decades.

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Document Object Identifier (DOI): 10.3386/w20685

Published: Sebastian Edwards, 2015. "Economic Development and the Effectiveness of Foreign Aid: A Historical Perspective," Kyklos, vol 68(3), pages 277-316.

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