Estimating aid-growth equations: the case of Pacific Island countries

Rao, B. Bhaskara and Sharma, Kanaiah Lal and Singh, Rup (2007): Estimating aid-growth equations: the case of Pacific Island countries.

Abstract

The seminal and controversial work of Burnside and Dollar (2000) has been the basis for many subsequent empirical works on the growth effects of overseas development aid. This paper argues that the specifications used in these works are not consistent with the data and techniques used. We propose a modified production function in which total factor productivity depends on time as well as the aid ratio. Our empirical results show that the effect of aid on the steady state growth rate is insignificant in the selected Pacific Island countries. These countries are of interest because they receive the largest aid in per capita terms.

• Item Type: MPRA Paper
• Institution: university of the south pacific
• Language: English
• Keywords: Aid; growth; Burnside and Dollar; GETS; Pacific Island Countries
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O30 - General; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O56 - Oceania; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development