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Testing the Big Push Hypothesis - The Case of Montserrat

Lundin, Josefine LU and Kilman, Josefin LU (2014) NEKN01 20141
Department of Economics
Abstract (Swedish)
The idea of a big push is one of the earliest theories in development economics and the original justification for foreign aid. The past 30 years have witnessed the publication of numerous studies on aid effectiveness with varying results. This thesis proceeds from the discussion regarding the relationship between aid, economic growth and poverty reduction. The big push hypothesis implies increased aid and investments aiming to raise economic growth and thus reduce poverty. In this study, the hypothesis is examined by two methodological approaches, a macro study on developing countries and a case study of Montserrat. In 1997, Montserrat suffered from volcanic eruptions and has since received substantial amounts of development aid from the... (More)
The idea of a big push is one of the earliest theories in development economics and the original justification for foreign aid. The past 30 years have witnessed the publication of numerous studies on aid effectiveness with varying results. This thesis proceeds from the discussion regarding the relationship between aid, economic growth and poverty reduction. The big push hypothesis implies increased aid and investments aiming to raise economic growth and thus reduce poverty. In this study, the hypothesis is examined by two methodological approaches, a macro study on developing countries and a case study of Montserrat. In 1997, Montserrat suffered from volcanic eruptions and has since received substantial amounts of development aid from the UK. Departing from a panel data regression analysis on 79 developing countries between 1982 and 2010, the results indicate that a big push of aid promotes economic growth. However, when analyzing the aid-poverty relationship through conducting interviews with stakeholders in Montserrat, a big push of aid has not reduced poverty. This is due to the lack of sustainable economic and social development resulting in high cost of living, few employment opportunities, short-term character of implemented projects and an insufficient welfare system. Thus, combining the results from both approaches, this thesis concludes that the theoretical framework of the big push hypothesis is questioned. (Less)
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author
Lundin, Josefine LU and Kilman, Josefin LU
supervisor
organization
course
NEKN01 20141
year
type
H1 - Master's Degree (One Year)
subject
keywords
Big push of aid, Montserrat, economic growth, poverty reduction, panel data regression, interviews
language
English
id
4610697
date added to LUP
2014-09-22 11:44:06
date last changed
2014-09-22 11:44:06
@misc{4610697,
  abstract     = {{The idea of a big push is one of the earliest theories in development economics and the original justification for foreign aid. The past 30 years have witnessed the publication of numerous studies on aid effectiveness with varying results. This thesis proceeds from the discussion regarding the relationship between aid, economic growth and poverty reduction. The big push hypothesis implies increased aid and investments aiming to raise economic growth and thus reduce poverty. In this study, the hypothesis is examined by two methodological approaches, a macro study on developing countries and a case study of Montserrat. In 1997, Montserrat suffered from volcanic eruptions and has since received substantial amounts of development aid from the UK. Departing from a panel data regression analysis on 79 developing countries between 1982 and 2010, the results indicate that a big push of aid promotes economic growth. However, when analyzing the aid-poverty relationship through conducting interviews with stakeholders in Montserrat, a big push of aid has not reduced poverty. This is due to the lack of sustainable economic and social development resulting in high cost of living, few employment opportunities, short-term character of implemented projects and an insufficient welfare system. Thus, combining the results from both approaches, this thesis concludes that the theoretical framework of the big push hypothesis is questioned.}},
  author       = {{Lundin, Josefine and Kilman, Josefin}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Testing the Big Push Hypothesis - The Case of Montserrat}},
  year         = {{2014}},
}