Munich Personal RePEc Archive

Official development aid effectiveness and economic growth in African countries: The role of the governance

Yahyaoui, Ismahene and Hamdaoui, Mekki and Bouchoucha, Najeh (2019): Official development aid effectiveness and economic growth in African countries: The role of the governance. Published in:

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Abstract

This work revolves around support policies of developing countries which, in most cases, need financing and more particularly development aid. In this setting, the aim of this study is to evaluate the effectiveness of development aid for a sample of African countries of which 25 are considered to have intermediate incomes and 23 achieve low incomes. To do this, we relied on a cross-sectional regression over the period 1996-2014. Our results imply that good governance is a deterministic condition of the positive effect of aid on economic growth. Indeed, international aid unaccompanied by good governance practices (control of corruption, political stability, a sound regulatory quality, a rigid state of rights, government effectiveness, voice and accountability) has adverse effects on economic activity and creates more inequalities of opportunity, especially in low-income countries. Thus, we note that the better quality of institutions allow a better allocation of international aid towards productive projects which stimulates economic growth in the two sub regions. So, in order to achieve the desired goals of international aid, countries must first ensure political stability and develop a regulatory and institutional framework to organize economic activities, second need to protect individual properties and resolve disputes between players in different markets.

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