Does Foreign Aid Contribute to HDI Improvement?

Foreign aid is aimed at creating a favourable environment capable to foster economic growth and development in poorer countries. Accordingly, recipient countries might rely to a certain extent on external aid to attaint higher welfare levels. In principle, donour's aid-allocation preference, ai...

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Bibliographic Details
Published in:Advances in management and applied economics 2021-03, Vol.11 (2), p.13-27
Main Authors: Signor, Jordan, Vandernoot, Julien
Format: Article
Language:English
Subjects:
Developing countries
Economic conditions
Economic development
Economic growth
Economics
Foreign aid
GDP
Gross Domestic Product
Human Development Index
LDCs
Per capita
Politics
Poverty
Variables
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Summary:Foreign aid is aimed at creating a favourable environment capable to foster economic growth and development in poorer countries. Accordingly, recipient countries might rely to a certain extent on external aid to attaint higher welfare levels. In principle, donour's aid-allocation preference, aided country policies, its institutional background, and economic environment are decisive in the aid effectiveness. Should not the previous conditions be met, could the country fall into the poverty trap. Contrary to a large strand of the literature measuring the role external funding has with regards to its contribution to welfare and growth, we show that Human Development Index is positively driven by internal factors, whilst foreign aid, and private funding have no significant effect. This is coherent with a more recent strand of the literature, suggesting that on average, aid is ineffective in recipient countries.
ISSN:1792-7544
1792-7552
DOI:10.47260/amae/1122