13 Pages Posted: 19 Apr 2012
Date Written: May 2012
The link between foreign aid and economic growth has been a controversial issue with no strong consensus so far. This paper argues that a possible reason why some studies may conclude that aid is ineffective in promoting economic growth might be that not all aid is given for development purposes (i.e. aid given for strategic considerations, humanitarian reasons or emergency relief). This study classifies foreign aid into four subcategories: agricultural aid, social infrastructure aid, investment aid, and non‐investment aid. Using the generalized method of moments (GMM) estimation technique on a Barro type growth regression with panel data from the aid recipient economies, this paper finds that when aid is directed to the agricultural sector of the developing countries, it is positively and significantly related to growth and can affect economic growth in the short run.
Suggested Citation: Suggested Citation
Kaya, Ozgur and Kaya, Ilker and Gunter, Lewell F., Development Aid to Agriculture and Economic Growth (May 2012). Review of Development Economics, Vol. 16, Issue 2, pp. 230-242, 2012. Available at SSRN: https://ssrn.com/abstract=2042421 or http://dx.doi.org/10.1111/j.1467-9361.2012.00658.x
By Peter Boone
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