Does Aid Cause Changes in Economic Freedom?

65 Pages Posted: 2 Nov 2021 Last revised: 14 Feb 2022

See all articles by Jamie Bologna Pavlik

Jamie Bologna Pavlik

Texas Tech University - Department of Agricultural and Applied Economics

Benjamin Powell

Texas Tech University - Free Market Institute; Texas Tech University - Rawls College of Business

Andrew T. Young

Texas Tech University - Rawls College of Business

Date Written: February 2022

Abstract

We examine whether aid affects recipient countries’ economic freedom. The existing empirical literature examining this relationship has found conflicting results. However, all of these existing studies have struggled to employ plausible identification strategies to find a causal relationship between aid and economic freedom. Our study employs matching methods to better estimate the causal relationship between aid and economic freedom. We find that there is no meaningful causal impact of overall aid on recipient countries’ economic freedom. There is some evidence that, specifically, large and sustained increases in “governance-specific” aid lead to increases in economic freedom, but even then the effects appear to be quantitatively modest.

Keywords: foreign aid, economic freedom

JEL Classification: O43, O19, F35, P45

Suggested Citation

Bologna Pavlik, Jamie and Powell, Benjamin and Young, Andrew T., Does Aid Cause Changes in Economic Freedom? (February 2022). Free Market Institute Research Paper No. 3950832, Available at SSRN: https://ssrn.com/abstract=3950832 or http://dx.doi.org/10.2139/ssrn.3950832

Jamie Bologna Pavlik

Texas Tech University - Department of Agricultural and Applied Economics ( email )

Suite 167, 2625 Memorial Circle
TTU Administration
Lubbock, TX 79409
United States

Benjamin Powell

Texas Tech University - Free Market Institute ( email )

Box 45059
Lubbock, TX 79409-5059
United States
806.742.7138 (Phone)
806.742.1854 (Fax)

HOME PAGE: http://www.fmi.ttu.edu

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States
806.834.3097 (Phone)
806.742.1854 (Fax)

Andrew T. Young (Contact Author)

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

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