The Effects of Foreign Aid in Sub-Saharan Africa

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Title: The Effects of Foreign Aid in Sub-Saharan Africa
Authors: Gillanders, Robert
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Date: Aug-2011
Abstract: This paper contributes to the aid effectiveness debate by applying a vector autoregression model to a panel of Sub-Saharan African countries. This method avoids the need for instrumental variables and allows one to analyse the impact of foreign aid on human development and on economic development simultaneously. The full sample results indicate a small increase in economic growth following a fairly substantial aid shock. The size of the effect puts the result somewhere between the arguments of aid optimists and those of aid pessimists. Economic growth is found to respond more to aid shocks in groups defined by better economic policies, poor institutions and high aid dependence. Human development, for which I use the growth rate of life expectancy as a proxy, responds positively to aid shocks in democracies and in good institutional environments.
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Keywords: Foreign aidOfficial Development Assistance (ODA)Economic developmentHuman development
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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