@inproceedings{Herzer2010Long,
abstract = {This paper makes two main contributions. First, we examine the long-run effect of foreign aid on domestic output for 59 developing countries using heterogeneous panel cointegration techniques to control for omitted variable and endogeneity bias and to detect possible cross-country differences in the output effect of aid. The main result is that aid has, on average, a negative long-run effect on output, but there are large differences across countries (in about a third of cases the effect is positive). Second, we use a general-to-specific variable selection approach to systematically search for country-specific factors explaining the cross-country differences in the estimated long-run effect of aid. In contrast to previous studies, we find that aid effectiveness does not depend primarily on factors such as the quality of economic policy, the share of a country's area that is in the tropics, the level of democracy or political stability. The results suggest that the cross-country heterogeneity in the output effect of aid can be explained mainly by cross-country differences in law and order, religious tensions and government size.},
address = {Frankfurt a. M.},
author = {Dierk Herzer and Oliver Morrissey},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {F35; O11; C23; 330; Foreign aid; Domestic output; Heterogeneous panel cointegration techniques; General-to-specific approach},
language = {eng},
number = {B19-V2},
publisher = {Verein f\"{u}r Socialpolitik},
series = {Beitr\"{a}ge zur Jahrestagung des Vereins f\"{u}r Socialpolitik 2010: \"{O}konomie der Familie - Session: Effectiveness of Foreign Aid},
title = {The Long-Run Effect of Foreign Aid on Domestic Output},
url = {http://hdl.handle.net/10419/37470},
year = {2010}
}
