Abstract

http://ssrn.com/abstract=887996
 
 

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Aid and Growth: What Does the Cross-Country Evidence Really Show?


Raghuram G. Rajan


University of Chicago - Booth School of Business; International Monetary Fund (IMF); National Bureau of Economic Research (NBER)

Arvind Subramanian


International Monetary Fund (IMF); Center for Global Development

June 2005

IMF Working Paper No. 05/127

Abstract:     
We examine the effects of aid on growth - in cross-sectional and panel data - after correcting for the bias that aid typically goes to poorer countries, or to countries after poor performance. Even after this correction, we find little robust evidence of a positive (or negative) relationship between aid inflows into a country and its economic growth. We also find no evidence that aid works better in better policy or geographical environments, or that certain forms of aid work better than others. Our findings, which relate to the past, do not imply that aid cannot be beneficial in the future. But they do suggest that for aid to be effective in the future, the aid apparatus will have to be rethought. Our findings raise the question: what aspects of aid offset what ought to be the indisputable growth enhancing effects of resource transfers? Thus, our findings support efforts under way at national and international levels to understand and improve aid effectiveness.

Number of Pages in PDF File: 49

Keywords: Aid and Growth, Cross-Sectional and Panel data

JEL Classification: 01, 040

working papers series


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Date posted: March 3, 2006  

Suggested Citation

Rajan, Raghuram G. and Subramanian, Arvind, Aid and Growth: What Does the Cross-Country Evidence Really Show? (June 2005). IMF Working Paper, Vol. , pp. 1-49, 2005. Available at SSRN: http://ssrn.com/abstract=887996

Contact Information

Raghuram G. Rajan (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-4437 (Phone)
773-702-0458 (Fax)
International Monetary Fund (IMF) ( email )
700 19th Street NW
Washington, DC 20431
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
773-702-9299 (Phone)
773-702-0458 (Fax)
Arvind Subramanian
International Monetary Fund (IMF) ( email )
700 19th Street NW
Washington, DC 20431
United States
Center for Global Development
2055 L St. NW
5th floor
Washington, DC 20036
United States
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