Controversies over the impact of development aid: it works; it doesn't; it can, but that depends …

TLDR

The debate centers on whether aid’s effectiveness depends on the policy regime of recipient countries. The study surveys five decades of empirical research on aid’s macroeconomic impact, aiming to clarify the debate over its effectiveness. The authors review empirical studies linking aid to growth over five decades. Early studies until the late 1990s produced contradictory or inconclusive results, but since the World Bank’s 2004 report research largely agrees that aid works to the extent that, without it, growth would be lower, while the context in which aid works remains contested. Copyright © 2006 John Wiley & Sons, Ltd.

Abstract

Abstract This paper surveys five decades of empirical research on the macroeconomic impact of aid, looking mainly at studies examining the link between aid and growth. It argues that studies dating until the late 1990s produced either contradictory or inconclusive results. Aid either worked, or it didn't, according to this research. The paper then highlights a major shift in the literature that coincided with the release of the World Bank's Assessing Aid: What Works, What Doesn't and Why . Practically, all research published since that report agrees with its general finding that aid works to the extent that in its absence, growth would be lower. One controversy may therefore have been settled. Yet, as shown in this paper, the report has set‐off an intense debate over the context in which aid works. That debate centres on whether the effectiveness of these inflows depends on the policy regime of recipient countries. Some possible avenues through which the heat might be taken out of this debate are considered. Copyright © 2006 John Wiley & Sons, Ltd.