Bah, El-hadj M. and Ward, Jeremy (2011): Effectiveness of foreign aid in Small Island Developing States.
Download (287Kb) | Preview
Global flows of Official Development Assistance are large and there is a large literature devoted to testing the effectiveness of these large flows. While among the poorest and the top recipients of foreign aid, Small Island Developing States (SIDS) are usually left out in the aid effectiveness literature. This paper seeks to remedy this by testing the main conditionality models of the literature using a sample of 37 SIDS. We also specify a new model that best fit the data for these countries. The general result is that aid has a positive and significant effect on growth in a number of specifications. However, we do not find supporting evidence that aid is effective only in countries with good policies or there is a threshold above which it has diminishing returns. Instead, we find, in our preferred specification, that aid is effective in the presence of sufficiently good governmental and social institutions.
|Item Type:||MPRA Paper|
|Original Title:||Effectiveness of foreign aid in Small Island Developing States|
|Keywords:||Foreign aid, Small Island Developing States, Aid effectiveness|
|Subjects:||O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O19 - International Linkages to Development; Role of International Organizations
|Depositing User:||El-hadj M. Bah|
|Date Deposited:||07. Jul 2011 03:31|
|Last Modified:||13. Feb 2013 03:35|
Bulir, A., and A. J. Hamann. "Volatility of Development Aid: An Update." IMF Staff Papers 54 (2007): 727-39.
Bulir, A., and A. J. Hamann. "Aid Volatility: An Empirical Assessment." IMF Staff Papers 50, no. 1 (2003): 64-89.
Burnside, C., and D. Dollar. "Aid, Policies and Growth: Reply." American Economic Review 94 (2004): 781-84.
Burnside, C., and D. Dollar. "Aid, Policies, and Growth." The American Economic Review 90, no. 4 (September 2000): 847-868.
Burnside, C., and D. Dollar. “Aid, Policies, and Growth: Revisiting the Evidence.” World Bank Policy Research Paper Number O-2834, 2004b.
Bosworth, B., and S. M. Collins. "The Empirics of Growth: Comments and Discussion An Update." Brookings Papers on Economic Activity 2 (2003): 113-206.
Chauvet, L., and P. Guillaumont. “Aid and Growth Revisited: Policy, Economic Vulnerability and Political Instability.” CERDI Working Paper 2003.27, 2003.
Chervin, C., and S. van Wijnbergen. “Economic Growth and the Volatility of Foreign Aid.” Tinbergen Institute Discussion Paper, 2010.
Christensen, P. W., H. Doucouliagos, and M. Paldam. "Master List of the AEL: Aid Effectiveness Literature." University of Aarhus. 2010.
http://mit.econ.au.dk/vip_htm/MPaldam/papers-meta.php4 (accessed 11 11, 2010).
Clemens, M., S. Radalet, and R. Bhavnani. “Counting Chickens When They Hatch: The Short-Term Effect of Aid on Growth.” Centre For Global Development Working Paper 44, 2004.
Collier, P., and D. Dollar. "Aid Allocation and Poverty Reduction." European Economic Review 46 (2002): 1475-1500.
Cordella, T., and G. Dell'Ariccia. "Budget Support Versus Project Aid: A Theoretical Appraisal." The Economic Journal 117 (October 2007): 1260-1279.
Easterly, W., R. Levine, and D. Roodman. "Aid, Policies, and Growth: Comment." The American Economic Review 94, no. 3 (June 2004): 774.
Dayton-Johnson, J., and J. Hoddinott. “Aid, Policies, and Growth, redux.” Dalhousie University Working Paper, 2003.
Dalgaard, C.-J., and H. Hansen. "On Aid, Growth, and Good Policies." Journal of Development Studies 37, no. 6 (August 2001): 17-41.
Dalgaard, C.-J., H. Hansen, and F. Tarp. "On the Empirics of Foriegn Aid and Growth." Economic Journal 114, no. 191-216 (June 2004).
Doucouliagos, H., and M. Paldam. "Aid Effectiveness on Accumulation: A Meta Study." KYKLOS 59, no. 2 (2006): 227-254.
Doucouliagos, H., and M. Paldam. "Conditional Aid Effectiveness: A Meta-Study." Journal of International Development 22 (2010): 391-410.
Doucouliagos, H., and M. Paldam. "The Aid Effectiveness Literature: The Sad Results of 40 Years of Reasearch." Journal of Economic Surveys 23, no. 3 (2009): 443-461.
Feeny, S., and M. McGillivray. "Aid and Growth in Small Island Developing States." Journal of Development Studies 46, no. 5 (2010): 897-917.
Guillaumont, P. “Assessing the Economic Vulnerability of Small Island Developing States and the Least Developed Countries.” CERDI Working Paper 2009.12, 2009.
Guillaumont, P., and L. Chauvet. "Aid and Performance: A Reassessment." Journal of Development Studies 37, no. 66-92 (2001).
Gomanee, K., S. Girma, and O. Morrissey. “Aid, Public Spending, and Human Welfare: Evidence from Quantile Regressions.” DSA Annual Conference Paper, 2003.
Hajimichael, M. T., D. Ghura, M. Mühleisen, R. Nord, and E. Ucer. “Sub-Saharan Africa: Growth, Savings and Investment, 1986-93.” IMF Occasional Paper, No. 118, 1995.
Hansen, H., and F. Tarp. "Aid and Growth Regressions." Journal of Development Economics 64 (2001): 547-570.
Hansen, H., and F. Tarp. "Aid Effectiveness Disputed." Journal of International Development 12 (2000): 375-398.
Hefeker, C. “Project Aid or Budget Aid? The Interests of Governments and Financial Institutions. “ University of Siegen Conference Report (2005).
Jelovac, I., and F. Vandeninden. “How Should Donors Give Foreign Aid? Project Aid Versus Budget Support.” CNRS Working Paper 08-13, 2008.
Kaufmann, D., A. Kraay, and P. Zoido. “Aggregating Governance Indicators.” World Bank Policy Research Working Paper No. 2195, 1999.
Kenny, C. “What Is Effective Aid? How Would Donors Allocate It?” World Bank Policy Research Working Paper 4005, 2006.
Kosack, S. "Effective Aid: How Democracy Allows Development Aid to Improve the Quality of Life." World Development 31 (2003): 1-22.
Lensick, R., and H. White. "Are There Negative Returns to Aid?" Journal of Development Studies 37, no. 6 (2001): 42-65.
Murphy, R. G., and N. G. Tresp. “Government Policy and the Effectiveness of Foreign Aid.” Economics Dept, Boston College, Working Paper 399, 2006.
Masud, N., and B. Yontcheva. “Does Foreign aid Reduce Poverty? Empirical Evidence from Nongovernmental and Bilateral Aid.” IMF Working Paper, 2005.
McGillivray, M., and F. Noorbakhsh. “Aid, Conflict and Human Development.” University of Glasgow Working Papers 2007-03, 2007.
Miquel-Florensa, J. M. “Aid Effectiveness: A Comparison of Tied and Untied Aid.” York University Working Paper 2007-02, 2007.
Moe, T. L. "An Empirical Investigation of Relationships Between Official Development Assistance (ODA) and Human and Educational Development." International Journal of Social Economics 35, no. 3 (2008): 202-221.
Pavlov, V., and C. Sugden. "Aid and Growth in the Pacific Islands." Asia-Pacific Economic Literature 20, no. 2 (2006): 38-55.
Sachs, J. D. “Institutions Don't Rule: Direct Effects of Geography on per Capita Income.” National Bureau of Economics Working Paper W9490, 2003.
Sachs, J. D. “Tropical Underdevelopment.” National Burea of Economic Reasearch Working Paper W8119, 2001.
Rajan, R. G., and A. Subramanian. "Aid and Growth: What Does The Cross Country Evidence Really Show?" The Review of Economics and Statistics 90, no. 4 (November 2008): 643-665.
Rajan, R. G., and A. Subramanian. “Aid and Growth: What Does the Cross-Country Evidence Really Show?” IMF Working Paper, 2005.
Rao, B. B., K. L. Sharma, and R. Singh. “Estimating Aid-Growth Equations: the Case of Pacific Island Countries.” MPRA Paper No. 4696, 2007.
Roodman, D. “How to do xtabond2: An Introduction to "Difference" and "System" GMM in Stata.” Center for Global Development Working Paper 103, 2006.
Roodman, D. “Macro Aid Effectiveness Research: A Guide for the Perplexed.” Center for Global Development Working Paper 134, 2007.
Roodman, D. “The Anarchy of Numders: Aid, Development and Cross-Country Empirics.” Center for Global Development Working Paper 32, 2004.
Roodman, D. “Through the Looking Glass, and What OLS Found There: On Growth, Foreign Aid, and Reverse Causality.” Working Paper, Centre for Global Development, Centre for Global Development, 2008.
Teboul, R., and E. Moustier. "Foreign Aid and Economic Growth: The Case of the Countries South of the Mediterranean." Applied Economics Letters 8 (2001): 187-90.
Wagner, L. “Thresholds in Aid Effectiveness.” CERDI Working Paper 2008.22, 2008.
Williamson, C. "Foreign Aid and Human Development: The Impact of Foreign Aid to the Health Sector." Southern Economic Journal 75, no. 1 (2008): 188-207.