Aid%20and%20Growth%3A%20Politics%20Matters

Working Papers

Aid and Growth: Politics Matters


CODE: WP-601
AUTHOR(s): Bobba, Matteo , Powell, Andrew
PUBLISHED: January 2007
LANGUAGE: English
RELATED TOPICS: Government and Democracy
DOWNLOAD FILE IN: English

Abstract:

The literature on aid effectiveness has focused more on recipient policies than the determinants of aid allocation yet a consistent result is that political allies obtain more aid from donors than non-allies. This paper shows that aid allocated to political allies is ineffective for growth, whereas aid extended to countries that are not allies is highly effective. The result appears to be robust across different specifications and estimation techniques. In particular, new methods are employed to control for endogeneity. The paper suggests that aid allocation should be scrutinized carefully to make aid as effective as possible.

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