Can Foreign Aid Buy Growth?

The widely publicized finding that “aid promotes growth in a good policy environment” is not robust to the inclusion of new data or alternative definitions of “aid,” “policy” or “growth.” The idea that “aid buys growth” is on shaky ground theoretically and empirically. It doesn’t help that aid agenc...

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Bibliographic Details
Published in:The Journal of economic perspectives 2003-07, Vol.17 (3), p.23-48
Main Author: Easterly, William
Format: Article
Language:English
Subjects:
Corruption
Developing countries
Economic conditions
Economic development
Economic growth
Economic growth models
Economic policy
Economic reform
Economic theory
Economics
Economists
Financial investments
Foreign aid
GDP
Gross Domestic Product
International development
International financial institutions
International trade
Investment
LDCs
Poverty alleviation
Sustainable development
Symposium: Global Poverty Reduction
Variables
World Bank
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Summary:The widely publicized finding that “aid promotes growth in a good policy environment” is not robust to the inclusion of new data or alternative definitions of “aid,” “policy” or “growth.” The idea that “aid buys growth” is on shaky ground theoretically and empirically. It doesn’t help that aid agencies face poor incentives to deliver results and underinvest in enforcing aid conditions and performing scientific evaluations. Aid should set more modest goals, like helping some of the people some of the time, rather than trying to be the catalyst for societywide transformation.
ISSN:0895-3309
1944-7965
DOI:10.1257/089533003769204344