Recent research yields widely divergent estimates of the cross-country relationship between foreign aid receipts and economic growth. We propose and test two reasons for this divergence, both of which relate to the timing of effects between aid and growth. First, these studies have insufficiently considered the lag with which aid might affect growth, particularly certain kinds of aid. Second, they have sought to reduce the bias from contemporaneous reverse causation with the use of instrumental variables that appear to be invalid, weak, or both. We reanalyze data from the three most influential published aid-growth studies, strictly conserving their regression specifications, adding sensible assumptions about timing and avoiding questionable instruments. With these changes, the research designs from all of these studies yield one finding: that increases in aid have been followed on average by modest increases in investment and growth. The most plausible explanation is that aid causes some degree of growth in recipient countries, though the magnitude of this relationship is modest, varies greatly across recipients, and diminishes at high levels of aid. www.cgdev.orgThe Center for Global Development is an independent, nonprofit policy research organization dedicated to reducing global poverty and inequality and to making globalization work for the poor. Use and dissemination of this Working Paper is encouraged; however, reproduced copies may not be used for commercial purposes. Further usage is permitted under the terms of the Creative Commons License.The views expressed in CGD Working Papers are those of the authors and should not be attributed to the board of directors or funders of the Center for Global Development. Forthcoming in Economic JournalAbstract: Recent research yields widely divergent estimates of the cross-country relationship between foreign aid receipts and economic growth. We propose and test two reasons for this divergence, both of which relate to the timing of effects between aid and growth. First, these studies have insufficiently considered the lag with which aid might affect growth, particularly certain kinds of aid. Second, they have sought to reduce the bias from contemporaneous reverse causation with the use of instrumental variables that appear to be invalid, weak, or both. We reanalyze data from the three most influential published aid-growth studies, strictly conserving their regression specifications, adding sensible assumptions about timing and avoiding questionable instruments. With these changes, the research designs from all of these studies yield one finding: that increases in aid have been followed on average by modest increases in investment and growth. The most plausible explanation is that aid causes some degree of growth in recipient countries, though the magnitude of this relationship is modest, varies greatly across recipients, and diminishes at high levels of aid. JEL Classification Numbers: F35, O11, O19. * We benefited greatly from extensive discussions with W...

Concern has intensified in recent years that many instrumental variables used in widely-cited growth regressions may be invalid, weak, or both. Attempts to remedy this general problem remain inadequate. We show how a range of published studies can offer more evidence that their results are not spurious. Key steps include: grounding growth regressions in more generalized theoretical models, deployment of new methods for estimating sensitivity to violations of exclusion restrictions, opening the “black box” of GMM with supportive evidence of instrument strength, and utilization of weak-instrument robust tests and estimators. (JEL C52, E23, F35, O41, O47)

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How do income shocks affect international migration flows from poor countries? Income growth not only increases the opportunity cost of migration but also eases liquidity constraints. I develop a method to separate these countervailing individual effects and identify the overall income elasticity of migration. Using new administrative and census data from Indonesia, I find that positive agricultural income shocks increase labor emigration flows, particularly in villages with relatively more small landholders. However, in the most developed rural areas, persistent income shocks reduce emigration. Overall, the findings highlight the important role of wealth heterogeneity in shaping migration flows as incomes rise. (JEL F22, J43, O13, O15, Q11, Q12, R23)

The presence of a westward-moving frontier of settlement shaped early U.S. history. In 1893, the historian Frederick Jackson Turner famously argued that the American frontier fostered individualism. We investigate the Frontier Thesis and identify its long-run implications for culture and politics. We track the frontier throughout the 1790-1890 period and construct a novel, county-level measure of total frontier experience (TFE). Historically, frontier locations had distinctive demographics and greater individualism. Long after the closing of the frontier, counties with greater TFE exhibit more pervasive individualism and opposition to redistribution. This pattern cuts across known divides in the U.S., including urban-rural and north-south. We provide evidence on the roots of frontier culture, identifying both selective migration and a causal effect of frontier exposure on individualism. Overall, our findings shed new light on the frontier's persistent legacy of rugged individualism.