Abstract

This chapter employs parametric and nonparametric methods to examine the impact of aid (quantity and quality) on growth in the former British and French colonies of Africa over the period 1975–2010. The quantity of aid is proxied by a quadratic term of the aid variable while the quality, by different source of aid. Results indicate that foreign aid exhibits diminishing returns when a countries’ legal origin is taken into account. Bilateral aid is found to be effective only in the former British colonies, while multilateral aid generates growth regardless of legal origin but only above a certain threshold. Moreover, good governance is shown to stimulate growth and improve aid effectiveness.

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