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Can Foreign Aid Spur Growth? Empirical evidence from the developing world between 1978 and 2013

Eriksson, Robin LU (2016) NEKN01 20161
Department of Economics
Abstract (Swedish)
This study aims to investigate the impact of foreign aid on economic growth by using an exogenous instrument identified by Galiani et al. (2015). Researchers have through the years failed to agree on whether aid causes growth, being unable to identify an exogenous instrument that can eliminate the endogeneity problem associated with aid and growth. Galiani et al. (2015) claim to have found such an instrument and this study draws inspiration from their research aiming to test the robustness of their findings. It is found that there is a statistically significant causal relationship and that a one percentage point increase of aid relative to GDP per capita increases growth by 0.029 – 0.037 percentage points. The finding appears quite robust... (More)
This study aims to investigate the impact of foreign aid on economic growth by using an exogenous instrument identified by Galiani et al. (2015). Researchers have through the years failed to agree on whether aid causes growth, being unable to identify an exogenous instrument that can eliminate the endogeneity problem associated with aid and growth. Galiani et al. (2015) claim to have found such an instrument and this study draws inspiration from their research aiming to test the robustness of their findings. It is found that there is a statistically significant causal relationship and that a one percentage point increase of aid relative to GDP per capita increases growth by 0.029 – 0.037 percentage points. The finding appears quite robust through sensitivity analysis and different model specifications. (Less)
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author
Eriksson, Robin LU
supervisor
organization
course
NEKN01 20161
year
type
H1 - Master's Degree (One Year)
subject
keywords
foreign aid, economic growth, development, two stage least squares, panel data
language
English
id
8876176
date added to LUP
2016-06-22 14:26:23
date last changed
2016-06-22 14:26:23
@misc{8876176,
  abstract     = {This study aims to investigate the impact of foreign aid on economic growth by using an exogenous instrument identified by Galiani et al. (2015). Researchers have through the years failed to agree on whether aid causes growth, being unable to identify an exogenous instrument that can eliminate the endogeneity problem associated with aid and growth. Galiani et al. (2015) claim to have found such an instrument and this study draws inspiration from their research aiming to test the robustness of their findings. It is found that there is a statistically significant causal relationship and that a one percentage point increase of aid relative to GDP per capita increases growth by 0.029 – 0.037 percentage points. The finding appears quite robust through sensitivity analysis and different model specifications.},
  author       = {Eriksson, Robin},
  keyword      = {foreign aid,economic growth,development,two stage least squares,panel data},
  language     = {eng},
  note         = {Student Paper},
  title        = {Can Foreign Aid Spur Growth? Empirical evidence from the developing world between 1978 and 2013},
  year         = {2016},
}