Geopolitics and the effect of foreign aid on economic growth: 1970–2001

Abstract

Previous aid effectiveness research often claims that foreign aid has been unsuccessful in increasing growth rates. This result could be due either to methodological weaknesses, or to genuine aid efficiency losses. Empirically, the author finds that once the best available techniques are employed, aid has a significant but moderate average effect on growth over the period . A promising explanation of why the estimated returns to aid are not larger is that bilateral aid had no significant effect on growth during the Cold War (pre-1990), but had a significant and sizeable effect thereafter. In contrast, multilateral aid seems to have had sizeable and significant effects throughout. These results imply that the negative conclusions drawn by earlier research should be interpreted in their proper historical context, rather than as a necessary condemnation of current aid effectiveness.

Aid on Demand: African Leaders and the Geography of China's Foreign Assistance

“…To the extent that China's unwillingness to interfere in domestic politics renders the allocation of its aid more vulnerable to political capture by the leaders of recipient country governments, aid effectiveness will arguably suffer (Cohen 1995;Wright 2010;Briggs 2012Briggs , 2014. More generally, we know from cross-country studies that understanding the motives for granting aid is important because a donor's intent in allocating aid seems to impact the effectiveness of aid (e.g., Headey 2008;Bearce and Tirone 2010;.…”

Does Aid Effectiveness Depend on the Quality of Donors?

“…Strategic and geopolitical motives of donors are also likely to erode the effectiveness of aid. Headey (2008), Bearce and Tirone (2010), and Bermeo (2016) consider aid to be geopolitically motivated under Cold War conditions. Dreher et al (2016) show that aid is less effective 1 The role of the recipient countries' policies and institutions has been stressed by the World Bank (1998) and Burnside and Dollar (2000).…”

Ayuda e Innovación: ¿un estímulo para la eficacia de la ayuda?

“…In addition, donors' foreign policy interests do not properly explain the geographical allocation of multilateral flows (which we include in this study). 9 Previous studies on aid effectiveness that have estimated dynamic panel data models using the GMM are: Hansen and Tarp (2001), Dalgraad et al (2004), Clemens et al (2004), Chauvet and Guillaumont (2004), Rajan and Subramanian (2007), Roodman (2007), Heady (2008), Djankov et al (2009), and Tezanos et al (2009. 10 Simulation exercises by Kiviet (1995), Blundell and Bond (1998) and Hsiao et al (1999) show that the estimators obtained by the difference GMM are biased on finite samples for two reasons: first, due to the presence of autocorrelation in the error terms with finite samples and many moment conditions, and secondly, because whenever the coefficient of the autoregressive variable is very close to 1 (that is, the series are highly persistent or near a unit root process), the parameter cannot be identified using the moment conditions for equations in first differences.…”