Aid, Public Spending and Human Welfare: Evidence from Quantile Regressions

CREDIT Research Paper No. 03/13

29 Pages Posted: 26 Nov 2003

See all articles by Karuna Gomanee

Karuna Gomanee

Liverpool University

Sourafel Girma

Nottingham University Business School

Oliver Morrissey

University of Nottingham - Development Economics

Date Written: August 2003

Abstract

Does aid contribute to human development other than by increasing growth? In doing so, is aid more or less effective in poorer countries (those with low levels of aggregate welfare)? This paper addresses these issues, assessing if there is cross-country aggregate evidence for an effect of aid on welfare levels. We posit that aid can enhance human development by financing public expenditures that increase welfare indicators. Using quantile regressions, we report evidence that aid is associated with higher human development (the Human Development Index) and lower infant mortality (both indicators of aggregate welfare). Where there are differences across quantiles, aid is more effective in countries below the median of the welfare distribution, i.e. with lower levels of human development. Insofar as aggregate welfare is (inversely) correlated with poverty, we find evidence that aid can make a positive contribution to alleviating poverty, and that the effect appears to be greater in countries with lower levels of human development indicators.

Keywords: Aid Effectiveness, Human Welfare (HDI and infant mortality), Quantile Regressions

JEL Classification: O10, F35, I30

Suggested Citation

Gomanee, Karuna and Girma, Sourafel and Morrissey, Oliver, Aid, Public Spending and Human Welfare: Evidence from Quantile Regressions (August 2003). CREDIT Research Paper No. 03/13. Available at SSRN: https://ssrn.com/abstract=464200 or http://dx.doi.org/10.2139/ssrn.464200

Karuna Gomanee

Liverpool University ( email )

Chatham Street
Liverpool, L69 7ZA
United Kingdom

Sourafel Girma

Nottingham University Business School ( email )

Jubilee Campus
Nottingham, NG8 1BB
United Kingdom
+44 0 115 8466656 (Phone)

HOME PAGE: http://www.nottingham.ac.uk/~lizsmg/

Oliver Morrissey (Contact Author)

University of Nottingham - Development Economics ( email )

University Park
Nottingham, NG8 1BB
United Kingdom
+44 (0)115 9515475 (Phone)
+44 (0)115 951 4159 (Fax)

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