An Empirical Analysis of the Impact of Development Assistance on Poverty Reduction in Sub-Saharan Africa

Abstract

The target of official development assistance (ODA) is generally focused on international poverty reduction, and the latest performance of aid in reducing income poverty deserves attention. This paper matches data from 24 sub-Saharan African countries to test the poverty reduction effects of aid led by Western developed countries in the region. The results of the study show that, first, aid, both in the current and lag periods, there is no evidence that aid can effectively reduce income poverty; second, poverty has a strong inertial effect; and thirdly, inflation is very detrimental to poverty reduction in sub-Saharan African countries. This paper argues that aid led by Western developed countries cannot reduce income poverty because of the relatively limited scale of aid, the fact that aid incentives are not entirely focused on poverty reduction, the large number of aid projects aimed at raising the welfare level of the poor rather than income levels, and the existence of other negative factors that affect aid effectiveness.

Keywords: Sub-Saharan Africa, Development assistance, Poverty reduction

JEL Classification: F62, Q01, R58