Does Development Aid Help Poor Countries Catch Up?

Aarhus University Economics Paper No. 2005-16

29 Pages Posted: 18 Jun 2008

See all articles by Tryggvi Thor Herbertsson

Tryggvi Thor Herbertsson

University of Reykjavik

Martin Paldam

Aarhus University - Department of Economics

Date Written: August 16, 2005

Abstract

Aid flows are included into the standard cross-country catch-up relation. Robustness of the result is tested by changing time periods and by adding extra variables. The main results are: Absolute convergence and absolute aid effectiveness are both rejected. While conditional convergence is accepted, conditional aid effectiveness is found to be weak. The two relations are largely independent. However, aid has a clear activity effect in the short run. Finally, we try to divide the countries into an A-group where aid is effective and a B-group where it harms. Several criteria of division were explored, but none were very successful - the most satisfactory is the one that divides countries according to their level of development.

Keywords: Convergence, growth, development aid effectiveness

JEL Classification: C14, C23, F35, O4

Suggested Citation

Herbertsson, Tryggvi Thor and Paldam, Martin, Does Development Aid Help Poor Countries Catch Up? (August 16, 2005). Aarhus University Economics Paper No. 2005-16. Available at SSRN: https://ssrn.com/abstract=1147612 or http://dx.doi.org/10.2139/ssrn.1147612

Tryggvi Thor Herbertsson (Contact Author)

University of Reykjavik ( email )

Reykjavik
Iceland
+354 8613162 (Phone)

HOME PAGE: http://www.ru.is

Martin Paldam

Aarhus University - Department of Economics ( email )

Universitetsparken
Building 350
DK-8000 Aarhus C
Denmark
+45 8942 1133 (Phone)
+45 8613 6334 (Fax)

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