Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/112878
Authors: 
Langlotz, Sarah
Dreher, Axel
Year of Publication: 
2015
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2015: Ökonomische Entwicklung - Theorie und Politik - Session: Public Choice and Welfare G12-V1
Abstract: 
We use an excludable instrument to test the effect of foreign aid on economic growth, in a sample of 73 countries over the 1966-2009 period. We interact donors legislature fractionalization with a recipient country s probability to receive aid. The results show fractionalization to increase donors aid budgets, representing the over-time variation of our instrument, while the probability to receive aid introduces variation across recipient countries. Controlling for country- and period-specific effects that absorb the levels of the interacted variables, the interaction provides a powerful and excludable instrument. Making use of this instrument, our results show that aid increases growth.
JEL: 
O19
O11
F35
Document Type: 
Conference Paper

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