Growth, Poverty and Development Assistance: When Does Foreign Aid Work?

Abstract

This is a survey paper on aid effectiveness in terms of the contribution of development assistance to economic growth and poverty reduction. The article focuses primarily on the most recent generation of cross‐country studies. It concludes that there is a set of broad areas where the evidence reviewed shows signs of convergence that have direct relevance for policy decisions on aid and for aid‐effectiveness discussions. These areas are: aid levels (meaning if the level of aid is too low or too high); domestic political institutions (including political stability and the extent of decentralisation); the composition of aid (including sectors, modalities, objectives and time horizons); and the volatility and fragmentation of aid. We also identify two areas where there is little sign of convergence in the evidence: the importance or otherwise of ‘good’, meaning orthodox macroeconomic policies and whether grants are more effective than loans.

Evaluation of the Long-Term Stability and Impact of Remittances and Development Aid on Sustainable Economic Growth in Developing Countries

“…Namely, among other things, the absolute growth of international migrants to industrialised countries [2,3], an increasing amount of remittances in the last two decades [4,5] and their impacts on growth [6][7][8][9][10]. Many authors focused on questions dealing with the contribution of development aid to economic growth, poverty reduction and migration from developing countries [11][12][13][14]. Some authors focus on the impact of sustainable social and economic development in less-developed migrant-sending countries on migrant flows from those countries to developed countries [15] and the problems related to the ageing population in Europe and other developed countries.…”

Assessing the effectiveness of development co‐operation: Method matters

“…The literature on aid effectiveness focuses on its volume as the measure of aid, economic growth as the main measure of success, and the use of statistical models as the means of measurement. Sumner and Glennie (2015) categorize four “generations” of such econometric studies. The first, in the 1970s, focused on increased savings and investment as the main measure of success and the second and third, from the 1980s to 2004, on economic growth (Sumner & Glennie, 2015).…”

Development Aid, Drought, and Coping Capacity

“…The temporal aspect of aid effectiveness is also a source of some controversy (Clemens, Radelet, Bhavnani, & Bazzi, 2012); how soon should one expect the benefits to materialise? Ultimately, aid effectiveness in terms of fostering longterm economic growth is likely to depend on the quality of governance and institutions in the recipient country and the size and persistence of investments (Asongu & Nwachukwu, 2016;Sumner & Glennie, 2015).…”

“…In this article, we ask: what is the short-term health effect of development aid, and to what extent does aid reduce individual vulnerability to future climatic extremes? Official development assistance (ODA) projects come in many forms and their overall success in promoting economic growth is debated (Doucouliagos & Paldam, 2008;Sumner & Glennie, 2015). However, to the extent that development aid leads to general improvements in standards of living, it may also increase communities' pool of skills and resources needed to cope with disaster.…”