Aid Effectiveness: Opening the Black Box

UNU-WIDER 08/2011; WP/44.

Posted: 26 Nov 2014

See all articles by Channing Arndt

Channing Arndt

United Nations - World Institute for Development Economics Research (UNU/WIDER)

Finn Tarp

University of Copenhagen - Department of Economics

Sam Jones

University of Copenhagen - Department of Economics

Date Written: August 2011

Abstract

Controversy over the aggregate impact of foreign aid has focused on reduced form estimates of the aid-growth link. The causal chain, through which aid affects developmental outcomes including growth, has received much less attention. We address this gap by: (i) specifying a structural model of the main relationships; (ii) estimating the impact of aid on a range of final and intermediate outcomes; and (iii) quantifying a simplied representation of the full structural form, where aid impacts on growth through key intermediate outcomes. A coherent picture emerges: aid stimulates growth and reduces poverty through physical capital investment and improvements in health.

Keywords: growth; foreign aid; aid effectiveness; simultaneous equations

JEL Classification: C23, O1, O2, O4

Suggested Citation

Arndt, Channing and Tarp, Finn and Jones, Sam, Aid Effectiveness: Opening the Black Box (August 2011). UNU-WIDER 08/2011; WP/44. , Available at SSRN: https://ssrn.com/abstract=2530927

Channing Arndt (Contact Author)

United Nations - World Institute for Development Economics Research (UNU/WIDER) ( email )

Katajanokanlaituri 6 B
Helsinki, FI‐00160
Finland

Finn Tarp

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

Sam Jones

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

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