Types of Foreign Aid
41 Pages Posted: 23 Aug 2012 Last revised: 23 Jan 2014
Date Written: January 23, 2014
Foreign aid is given for many purposes and different intentions, yet most studies treat aid flows as a unitary concept. This paper uses factor analysis to separate aid flows into different types. The main types can be interpreted as aid for economic purposes, social purposes, and reconstruction; a residual category captures remaining purposes. Estimating the growth effects of separable types of aid suggests that most aid has no effects while reconstruction aid has direct positive effects. Although this type only applies in special circumstances, it has become more prevalent in more recent years.
Keywords: foreign aid, dimensionality, development, economic growth
JEL Classification: O11, F35
Suggested Citation: Suggested Citation