Abstract
This study departed from other agricultural aid-growth studies by measuring growth as the annual growth rate of agricultural value added and accounting for the moderating role of governance on the aid-growth effect. Using data on a panel of 117 developing countries from 1996 to 2020, aid negatively influenced agricultural growth. Governance had a negative but insignificant independent effect on growth. However, the interaction of governance with aid turned the aid-growth effect from a significant negative to a statistically insignificantly positive effect. Since the low level of governance produced the positive interaction effect, of the aid-growth relationship, escalation of (good) governance could produce a strong effect.
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