Publication

This publication examines the econometric literature on the relationship between how much foreign aid a countries receives and how it grows. Among the suggestions put forward are that aid raises growth in countries where economic policies are good; in countries where policies are good and a civil war recently ended; in all countries, but with diminishing returns; in non-tropical countries; in countries with difficult economic environments; or when aid increases in countries experiencing negative export price shocks. The author argues that among the suggestions examined, the aid-policy link proves weakest, while the aid-tropics link is most robust.