A pooled mean group analysis on aid and growth

Abstract

This article uses the pooled mean group estimator and an extended annual dataset to examine the effectiveness of aid on growth. The results indicate a significant long-run impact of aid and ‘good’ policy on growth, but conditioning aid on ‘good’ policy reduces the long-run growth rate.

Acknowledgement

I thank Gavin Cameron, Paul Collier, Jocelyn Finlay and Sam Hill for helpful suggestions and comments. All remaining errors are mine.

Notes

¹ The cross-section and time series dimension of the dataset is chosen with an eye to obtain a balanced panel. Low income countries are Algeria, Bolivia, Botswana, Colombia, Cote d'Ivoire, Dominican Republic, Ecuador, Egypt, Gambia, Ghana, Guatemala, Haiti, Honduras, India, Indonesia, Kenya, Madagascar, Malaysia, Morocco, Nicaragua, Niger, Nigeria, Pakistan, Paraguay, Philippines, Senegal, Sierra Leone, Sri Lanka, Sudan, Swaziland, Thailand, Togo, and Zimbabwe. Middle income countries are Argentina, Chile, Costa Rica, El Salvador, Gabon, Jamaica, Korea Republic, Mexico, Peru, Trinidad and Tobago, Turkey, Uruguay and Venezuela.