Aid Effectiveness: Looking at the Aid–Social Capital–Growth Nexus

Abstract

The authors examine the impact of institutional quality and social capital on aid effectiveness. They find strong evidence that social capital and institutions enhance aid effectiveness. Moreover, once they account for the role of social capital and institutions, the impact of policies tends to disappear. These findings have important policy implications as they indicate that conditioning aid allocation on "good policies" may not lead to an optimal (or fair) allocation of aid, as countries with high social capital at the macrolevel could actually make good use of aid regardless of the quality of policy. This casts doubt on the conclusions in Burnside and Dollar (2000) and the policy lessons derived from their findings.

Aid Modalities and Budgetary Response: Panel Data Evidence

“…Further to that, the role of social-cultural factors can be important in affecting the use of aid inflows (especially in the case of program aid) and the fiscal response to aid. On the latter point see Baliamoune-Lutz (2006) with regard to the aid-growth empirics. Having said that, a panel data approach such as the one adopted in the present paper can be very useful in helping us to see the global picture in the fiscal response literature, of paramount importance for policy purposes.…”

Do Institutions and Social Cohesion Enhance the Effectiveness of Aid? New Evidence From Africa

“…In fact, the empirical evidence supporting the presence of a non-linear relationshipdiminishing returns to aidis growing and is remarkably robust. 7 Possible channels for indirect effects of aid include the interaction between aid and economic policy (Burnside and Dollar, 2000), the interplay of aid and institutions (Burnside and Dollar, 2004;Baliamoune-Lutz and Mavrotas, 2009), and the interplay of aid and social cohesion (Baliamoune-Lutz and Mavrotas, 2009). Interestingly, while the empirical literature contains a large number of studies examining the interplay of aid and policy and its impact on growth, work on the interplay between institutions and aid is very limited, and studies of the interplay of aid and social cohesion, with the exception of Baliamoune-Lutz (2009a) and Baliamoune-Lutz and Mavrotas (2009) appear to be nonexistent.…”

Should Easier Access to International Credit Replace Foreign Aid?

“…For this and other properties of the the expenditure function see, for example, Dixit and Norman (1980). 9 Endowment other than capital are omitted as they do not vary in our analysis. The partial derivative of a revenue function with respect to the price of a good is the output supply function of that good.…”