Aid, Policies, and Growth : Revisiting the Evidence
The authors revisit the relationship between aid and growth using a new data set focusing on the 1990s. The evidence supports the view that the impact of aid depends on the quality of state institutions and policies. The authors use an overall meas...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, D.C.
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2004/03/3217937/aid-policies-growth-revisiting-evidence http://hdl.handle.net/10986/14784 |
| Summary: | The authors revisit the relationship
between aid and growth using a new data set focusing on the
1990s. The evidence supports the view that the impact of aid
depends on the quality of state institutions and policies.
The authors use an overall measure of institutions and
policies popular in the empirical growth literature. The
interaction of aid and institutional quality has a robust
positive relationship with growth that is strongest in
instrumental variable regressions. There is no support for
the competing hypothesis that aid has the same positive
effect everywhere. The authors also show that in the 1990s
the allocation of aid to low-income countries favored those
with better institutional quality. This
"selectivity" is sensible if aid in fact is more
productive in sound institutional and policy environments.
The cross-country evidence on aid effectiveness is supported
by other types of information as well: case studies,
project-level evidence, and opinion polls support the view
that corrupt institutions and weak policies limit the impact
of financial assistance for development. |
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