Aid and Growth: Politics Matters

32 Pages Posted: 25 Apr 2011

See all articles by Matteo Bobba

Matteo Bobba

Inter-American Development Bank (IDB) - Research Department

Andrew Powell

Inter-American Development Bank (IDB); Universidad Torcuato Di Tella - School of Business; Harvard University - Center for International Development (CID)

Date Written: January 2007

Abstract

The literature on aid effectiveness has focused more on recipient policies than the determinants of aid allocation yet a consistent result is that political allies obtain more aid from donors than non-allies. This paper shows that aid allocated to political allies is ineffective for growth, whereas aid extended to countries that are not allies is highly effective. The result appears to be robust across different specifications and estimation techniques. In particular, new methods are employed to control for endogeneity. The paper suggests that aid allocation should be scrutinized carefully to make aid as effective as possible.

Suggested Citation

Bobba, Matteo and Powell, Andrew P. and Powell, Andrew P., Aid and Growth: Politics Matters (January 2007). IDB Working Paper No. 503, Available at SSRN: https://ssrn.com/abstract=1820871 or http://dx.doi.org/10.2139/ssrn.1820871

Matteo Bobba (Contact Author)

Inter-American Development Bank (IDB) - Research Department ( email )

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Andrew P. Powell

Universidad Torcuato Di Tella - School of Business ( email )

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Argentina
+5411 4787-9349 (Phone)
+5411 4783-3220 (Fax)

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Harvard University - Center for International Development (CID) ( email )

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Cambridge, MA 02138
United States

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