Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/63603
Authors: 
Gomanee, Karuna
Girma, Sourafel
Morrissey, Oliver
Year of Publication: 
2005
Series/Report no.: 
Research Paper, UNU-WIDER, United Nations University (UNU) 2005/60
Abstract: 
This paper is a contribution to the literature on aid and growth. Despite an extensive empirical literature in this area, existing studies have not addressed directly the mechanisms via which aid should affect growth. We identify investment as the most significant transmission mechanism, and also consider effects through financing imports and government consumption spending. With the use of residual generated regressors, we achieve a measure of the total effect of aid on growth, accounting for the effect via investment. Pooled panel results for a sample of 25 Sub-Saharan African countries over the period 1970 to 1997 point to a significant positive effect of foreign aid on growth, ceteris paribus. On average, each one percentage point increase in the aid/GNP ratio contributes one-quarter of one percentage point to the growth rate. Africa’s poor growth record should not therefore be attributed to aid ineffectiveness.
Subjects: 
aid effectiveness
aid
growth
Sub-Saharan Africa
JEL: 
F35
O40
O55
ISBN: 
929190743X
Document Type: 
Working Paper

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