Measuring aid effectively in tests of aid effectiveness
Fielding, David; Knowles, Stephen
In the extensive empirical literature on aid effectiveness, aid is always measured as a share of GDP. However, measuring aid in real dollars per capita is also consistent with standard growth theory. We show that the choice of denominator makes an enormous difference to the sign and significance of coefficients on aid variables in crosscountry panel growth regressions. Our aim is to redirect attention towards the theoretical foundations of the growth literature.
Publisher: University of Otago
Series number: 704
Keywords: growth; aid effectiveness
Research Type: Discussion Paper