Aid, Shocks, and Growth

Analysis of the relationship between aid and growth by Burnside and Dollar found that the better a country's policies, the more effective aid is in raising growth in that country. But this result has been criticized for being sensitive to choi...

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Main Authors:	Collier, Paul, Dehn, Jan
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ADVERSE EFFECTS AID AID ALLOCATION AVERAGE CHANGE COMMODITY PRICES DATA SET DEPENDENT VARIABLE DEVELOPING COUNTRIES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DEVELOPMENT ISSUES DEVELOPMENT RESEARCH ECONOMETRIC ANALYSIS ECONOMIC ACTIVITY ECONOMIC GROWTH ECONOMIC MODELS ECONOMIC REVIEW ECONOMIC STUDIES EXPLANATORY VARIABLES EXPORTS FOREIGN AID FOREIGN EXCHANGE GROWTH EFFECT GROWTH EPISODES GROWTH PROCESS GROWTH RATE GROWTH REGRESSIONS INCOME INCOME MEAN INCREASING GROWTH INTERNATIONAL TRADE MACROECONOMIC POLICY MACROECONOMICS NATIONAL INCOME NEGATIVE SHOCK NEGATIVE SHOCKS NEGATIVE TERMS OIL POLICY RESEARCH POSITIVE SHOCKS POVERTY REDUCTION PRICE CHANGES PRICE INDEX PRICE INDICES PRIVATE SECTOR PRODUCERS RECESSION REDUCING POVERTY SIGNIFICANT EFFECT TARGETING TAXATION TERMS OF TRADE UNEMPLOYMENT PRICE STABILIZATION TARGETED ASSISTANCE ECONOMIC SHOCKS AID FLOWS
Online Access:	http://documents.worldbank.org/curated/en/2001/10/1614893/aid-shocks-growth http://hdl.handle.net/10986/19508

id	okr-10986-19508
recordtype	oai_dc
spelling	okr-10986-195082021-04-23T14:03:43Z Aid, Shocks, and Growth Collier, Paul Dehn, Jan ADVERSE EFFECTS AID AID ALLOCATION AVERAGE CHANGE COMMODITY PRICES DATA SET DEPENDENT VARIABLE DEVELOPING COUNTRIES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DEVELOPMENT ISSUES DEVELOPMENT RESEARCH ECONOMETRIC ANALYSIS ECONOMIC ACTIVITY ECONOMIC GROWTH ECONOMIC MODELS ECONOMIC REVIEW ECONOMIC STUDIES EXPLANATORY VARIABLES EXPORTS FOREIGN AID FOREIGN EXCHANGE GROWTH EFFECT GROWTH EPISODES GROWTH PROCESS GROWTH RATE GROWTH REGRESSIONS INCOME INCOME MEAN INCREASING GROWTH INTERNATIONAL TRADE MACROECONOMIC POLICY MACROECONOMICS NATIONAL INCOME NEGATIVE SHOCK NEGATIVE SHOCKS NEGATIVE TERMS OIL POLICY RESEARCH POSITIVE SHOCKS POVERTY REDUCTION PRICE CHANGES PRICE INDEX PRICE INDICES PRIVATE SECTOR PRODUCERS RECESSION REDUCING POVERTY SIGNIFICANT EFFECT TARGETING TAXATION TERMS OF TRADE UNEMPLOYMENT PRICE STABILIZATION TARGETED ASSISTANCE ECONOMIC SHOCKS AID FLOWS Analysis of the relationship between aid and growth by Burnside and Dollar found that the better a country's policies, the more effective aid is in raising growth in that country. But this result has been criticized for being sensitive to choice of sample and for neglecting shocks. The authors incorporate export price shocks into the analysis of aid's effect on growth. They construct export price indices using the approach pioneered by Deaton and Miller. They locate shocks by differencing the indices, removing predictable elements from the stationary process, and normalizing the residuals. Extreme negative shocks are the bottom 2.5 percent tail of this distribution. Introducing these extreme shocks into the Burnside-Dollar regression, the authors find that they are highly significant: unsurprisingly, extreme negative shocks reduce growth. Once these shocks are included, the Burnside-Dollar results become robust to choice of sample. Moreover, the adverse effects of negative shocks on growth can be mitigated through offsetting increases in aid. Indeed, targeting aid to countries experiencing negative shocks appears to be even more important for aid effectiveness than targeting aid to countries with good policies. But the authors show that, overall, donors have not used aid for this purpose. 2014-08-20T19:18:12Z 2014-08-20T19:18:12Z 2001-10 http://documents.worldbank.org/curated/en/2001/10/1614893/aid-shocks-growth http://hdl.handle.net/10986/19508 English en_US Policy Research Working Paper;No. 2688 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ADVERSE EFFECTS AID AID ALLOCATION AVERAGE CHANGE COMMODITY PRICES DATA SET DEPENDENT VARIABLE DEVELOPING COUNTRIES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DEVELOPMENT ISSUES DEVELOPMENT RESEARCH ECONOMETRIC ANALYSIS ECONOMIC ACTIVITY ECONOMIC GROWTH ECONOMIC MODELS ECONOMIC REVIEW ECONOMIC STUDIES EXPLANATORY VARIABLES EXPORTS FOREIGN AID FOREIGN EXCHANGE GROWTH EFFECT GROWTH EPISODES GROWTH PROCESS GROWTH RATE GROWTH REGRESSIONS INCOME INCOME MEAN INCREASING GROWTH INTERNATIONAL TRADE MACROECONOMIC POLICY MACROECONOMICS NATIONAL INCOME NEGATIVE SHOCK NEGATIVE SHOCKS NEGATIVE TERMS OIL POLICY RESEARCH POSITIVE SHOCKS POVERTY REDUCTION PRICE CHANGES PRICE INDEX PRICE INDICES PRIVATE SECTOR PRODUCERS RECESSION REDUCING POVERTY SIGNIFICANT EFFECT TARGETING TAXATION TERMS OF TRADE UNEMPLOYMENT PRICE STABILIZATION TARGETED ASSISTANCE ECONOMIC SHOCKS AID FLOWS
spellingShingle	ADVERSE EFFECTS AID AID ALLOCATION AVERAGE CHANGE COMMODITY PRICES DATA SET DEPENDENT VARIABLE DEVELOPING COUNTRIES DEVELOPMENT ASSISTANCE DEVELOPMENT ECONOMICS DEVELOPMENT ISSUES DEVELOPMENT RESEARCH ECONOMETRIC ANALYSIS ECONOMIC ACTIVITY ECONOMIC GROWTH ECONOMIC MODELS ECONOMIC REVIEW ECONOMIC STUDIES EXPLANATORY VARIABLES EXPORTS FOREIGN AID FOREIGN EXCHANGE GROWTH EFFECT GROWTH EPISODES GROWTH PROCESS GROWTH RATE GROWTH REGRESSIONS INCOME INCOME MEAN INCREASING GROWTH INTERNATIONAL TRADE MACROECONOMIC POLICY MACROECONOMICS NATIONAL INCOME NEGATIVE SHOCK NEGATIVE SHOCKS NEGATIVE TERMS OIL POLICY RESEARCH POSITIVE SHOCKS POVERTY REDUCTION PRICE CHANGES PRICE INDEX PRICE INDICES PRIVATE SECTOR PRODUCERS RECESSION REDUCING POVERTY SIGNIFICANT EFFECT TARGETING TAXATION TERMS OF TRADE UNEMPLOYMENT PRICE STABILIZATION TARGETED ASSISTANCE ECONOMIC SHOCKS AID FLOWS Collier, Paul Dehn, Jan Aid, Shocks, and Growth
relation	Policy Research Working Paper;No. 2688
description	Analysis of the relationship between aid and growth by Burnside and Dollar found that the better a country's policies, the more effective aid is in raising growth in that country. But this result has been criticized for being sensitive to choice of sample and for neglecting shocks. The authors incorporate export price shocks into the analysis of aid's effect on growth. They construct export price indices using the approach pioneered by Deaton and Miller. They locate shocks by differencing the indices, removing predictable elements from the stationary process, and normalizing the residuals. Extreme negative shocks are the bottom 2.5 percent tail of this distribution. Introducing these extreme shocks into the Burnside-Dollar regression, the authors find that they are highly significant: unsurprisingly, extreme negative shocks reduce growth. Once these shocks are included, the Burnside-Dollar results become robust to choice of sample. Moreover, the adverse effects of negative shocks on growth can be mitigated through offsetting increases in aid. Indeed, targeting aid to countries experiencing negative shocks appears to be even more important for aid effectiveness than targeting aid to countries with good policies. But the authors show that, overall, donors have not used aid for this purpose.
format	Publications & Research :: Policy Research Working Paper
author	Collier, Paul Dehn, Jan
author_facet	Collier, Paul Dehn, Jan
author_sort	Collier, Paul
title	Aid, Shocks, and Growth
title_short	Aid, Shocks, and Growth
title_full	Aid, Shocks, and Growth
title_fullStr	Aid, Shocks, and Growth
title_full_unstemmed	Aid, Shocks, and Growth
title_sort	aid, shocks, and growth
publisher	World Bank, Washington, DC
publishDate	2014
url	http://documents.worldbank.org/curated/en/2001/10/1614893/aid-shocks-growth http://hdl.handle.net/10986/19508
_version_	1764439908401807360

Aid, Shocks, and Growth

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