Working Paper: CEPR ID: DP10129
Authors: Nancy Qian
Abstract: Foreign aid is one of the most important policy tools that rich countries use for helping poor countries to improve population well-being and facilitate economic and institutional development. The empirical evidence on its benefits is mixed and has generated much controversy. This paper presents descriptive statistics which show that foreign aid to very poor countries accounts for very little of total global aid; reviews the evidence that foreign aid is often determined by the objectives of donor countries rather than the needs of recipient countries; argues that the evidence on the impact of aggregate foreign aid is hindered by problems of measurement and identification, which are partly due to the heterogenous nature of aid; and discusses recent studies using natural and randomized experiments to examine narrowed definitions of aid on more disaggregated outcomes.
Keywords: Development; Global Poverty; Political Economy
JEL Codes: O1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| foreign aid (F35) | poverty alleviation (I32) |
| foreign aid (F35) | conflict (D74) |
| political and economic interests of donor countries (F35) | aid effectiveness (F35) |
| foreign aid (F35) | political accountability (D72) |
| U.S. military aid in Colombia (H56) | increased attacks by paramilitary groups (H56) |
| foreign aid (F35) | Dutch disease (Q33) |
| foreign aid (F35) | economic growth (O49) |