Aid Proliferation and Economic Growth: A Cross-Country Analysis

Author Name KIMURA Hidemi  (Fellow, RIETI) /SAWADA Yasuyuki  (Faculty Fellow, RIETI) /MORI Yuko  (Hitotsubashi University)
Creation Date/NO. July 2007 07-E-044
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In this paper, we examine whether aid proliferation hinders aid effectiveness in promoting economic growth. We employ a wide variety of specifications of the standard aid-growth regression using Roodman's (2007a) dataset. Specifically, we include a donor-concentration index as a proxy for donor proliferation and the interaction term between aid and a donor-concentration index as additional independent variables. Our best empirical results are in favor of a hypothesis that aid proliferation involves a negative effect on economic growth of the recipient countries with proper correction for possible biases arising from omitted variable and endogeneity problems.