Foreign Aid and Direct Effect of Poverty Reduction in Thailand

Abstract

Abstract This study examines the effects of foreign aid on poverty reduction in Thailand dividing into ways. One is the direct effect of poverty reduction and the other is the indirect effect of economic growth. Dividing the effect of foreign aid into the direct effect of poverty reduction and the indirect effect through economic growth will contribute to a more efficient way of providing foreign aid by adjusting its purpose and method of foreign aid. The estimation results are summarized as follows: First, the relationship between the infant mortality rate, as a substitute for poverty reduction, and foreign aid from 1961 to 2022 was not significantly estimated using OLS or VAR (Vector Autoregression) models. Second, the relationship between the poverty ratio and foreign aid from 1988 to 2020 for every other year was also insignificant, although economic growth was estimated to be significantly positive. Based on these results, it can be inferred that foreign aid has no direct effect on poverty reduction in Thailand; rather, the indirect effect seems more important. JEL classification numbers: F35, O53. Keywords: Foreign Aid, Poverty, Thailand.