Effect Of Foreign Aid Research Articles

Can China's aid promote the position upgrading of recipient countries in the global value chains

AbstractThis paper examines the effect of China's aid on the position upgrading of recipient countries in the global value chains (GVCs). It is found that China's aid can significantly promote the position upgrading of recipient countries in the GVCs. Mechanism tests have shown that China's aid has ultimately contributed to upgrading the recipient countries' position in the GVC through the three channels of upgrading their technological level, improving their infrastructure, and promoting their level of industrialization. The findings of this paper contribute to promoting research on the effectiveness of foreign aid in the development of recipient countries.

Foreign Aid, Economic Growth, and Poverty Reduction in Bolivia

ABSTRACT: Foreign aid has been a critical instrument in addressing economic development and poverty reduction in many low-income countries. This article investigates the relationship between foreign aid, economic growth, and poverty reduction in Bolivia, shedding light on how various factors, including institutional quality, human capital, economic freedom, and the level of democracy influence the effectiveness of foreign aid. Employing smooth transition autoregressive models, the analysis highlights the intricate interplay between foreign aid, economic growth, and poverty reduction. The empirical findings provide evidence that foreign aid exerts a positive influence on both economic growth and poverty reduction, especially when aligned with investments in human capital and the enhancement of economic freedom. However, the revelations brought forth by this study challenge the conventional wisdom, revealing that these relationships are not linear. In emphasizing the nuanced nature of aid’s impact on economic development and poverty reduction, this study contributes significantly to the ongoing discourse on foreign aid efficacy. It underscores the importance of tailoring aid interventions to the specific contextual intricacies of the recipient country. The interplay between foreign aid, institutional quality, human capital, economic freedom, and democratic governance makes clear that a tailored, context-specific approach is needed for foreign aid to have the best possible impact. If the case of Bolivia serves as a useful example for other developing nations, the principal recommendation emanating from these findings is that foreign aid must be carefully tailored to the unique needs and challenges of the recipient nation. A one-size-fits-all approach is insufficient in harnessing aid’s full potential to foster sustainable economic growth and meaningful poverty reduction. The findings presented here serve not only as a contribution to the academic literature but also as a roadmap for policymakers and development practitioners navigating the complex terrain of foreign aid. By emphasizing the intricate dynamics of foreign aid and other important institutional, economic, and human capital factors, the empirical findings in this article advance the understanding of foreign aid’s role as a catalyst for transformative change and set the stage for more targeted, effective interventions in the pursuit of economic development and poverty eradication.

Beyond economic growth goals: can foreign aid mitigate carbon dioxide emissions in developing countries?

We provide novel and compelling evidence that foreign aid has significant mitigating impacts on carbon dioxide emissions in a comprehensive panel dataset of 127 developing countries from 1995 to 2019. This impact operates through a direct effect resulting from the adoption of green and eco-friendly investments and an indirect effect driven by economic growth. Moreover, we reveal that the effectiveness of foreign aid in reducing carbon dioxide emissions is contingent upon the country's income level. Specifically, foreign aid shows limited efficacy in curbing emissions in low-income countries, while its influence becomes substantial in middle-income countries. This result indicates that economic development plays a moderating effect in the aid – climate change nexus. Furthermore, the findings of this research are of paramount importance to donor and recipient countries emphasizing the role of governance and political stability in enhancing the effectiveness of aid in combatting climate change and identifying promising pathways for sustainable development.

The Crippling Effect of Foreign Aid

The Crippling Effect of Foreign Aid

Making aid work: institutional thresholds and FDI

Purpose The purpose of this paper is to analyse the institutional threshold effects of foreign aid on foreign direct investment (FDI). Design/methodology/approach This paper develops a theoretical model from an extended Solow model that introduces the conductive effect of institutions in an aid recipient country towards the capacity of attracting FDI. This study evidences threshold effects with the most recent panel threshold models that consider endogeneity issues. The data on economic institutions and foreign aid are decomposed into disaggregated level to reveal the detailed threshold pattern. Several sample subsets are used for a heterogeneity analysis. Findings Conducting empirical research on a sample of 62 countries during the period 2003–2016, this study finds robust evidence of the existence of an institutional threshold in the aid–FDI nexus which a country must attain to reap the full attraction of FDI by foreign aid providing financial resources. Furthermore, foreign aid tends to promote FDI in institutions characterized by a right-sized government, a strengthened legal system and an appropriate regulatory environment. On the other hand, aid may crowd out FDI. The results are robust to regional combinations and a subset of low and lower-middle-income countries. In addition, this study finds that aid targeted at social infrastructure and services has a positive effect regardless of institutional threshold. Originality/value This paper contributes to the literature by introducing a non-linear and discontinuous effect of aid on FDI, i.e. a threshold effect, highlighting the relevance of legal systems and regulations and the possibility of a crowding-out effect on FDI for specific institutional regimes. The thresholds provide a guide for donor countries to ensure aid effectiveness at the risk of being counterproductive and for recipient countries to better assess the institutional dimensions that need to be improved.

Foreign Aid, Violence, and Electoral Support in Developing Countries: Experimental Evidence From the Philippines

Election-related violence is rampant in many developing countries that receive foreign aid. However, it is not well understood why voters often elect representatives who are associated with such violence. In this article, I investigate why voters might support politicians who resort to violence. I argue that the poor tend to vote for candidates who deliver tangible local benefits through foreign aid projects even when those candidates use violence during election periods. To support this argument, I conducted a nationwide survey in the Philippines that included an experiment about the effects of foreign aid and violence on voters’ electoral support for a candidate. I find that poor voters who reside in a region where basic public goods and services are deficient are more likely to support a candidate whose district has received foreign aid, regardless of her alleged electoral violence. This research sheds light on a mechanism that links poverty to electoral violence in less developed countries. It also reveals an unintended consequence of foreign aid: increasing the likelihood of electoral violence.

Foreign aid: An agent for socioeconomic development? A case study from an emerging economy: Pakistan

AbstractPakistan's economy since its creation has remained heavily dependent on foreign aid, especially to manage the ever‐widening gap between the available financial resources, development expenditure, fiscal deficit, and current account deficit. This article critically evaluates the effectiveness of foreign aid in Pakistan from 2000 to 2022 via an in‐depth literature review and the rational actor model (RAM). Furthermore, a mixed‐method approach based on descriptive quantitative and in‐depth qualitative research methods was adopted for this study. The article demonstrates that RAM can assist policy makers, enabling them to make decisions vis‐à‐vis foreign aid while safeguarding national interests, particularly economic interests. However, this study finds that for Pakistan to achieve sustainable economic growth, increasing exports and attracting more foreign direct investment hold greater potential than continued reliance on foreign aid. In conclusion, the article prescribes policy measures to restructure Pakistan's political system to foster socioeconomic development through trade liberalization and good governance.Related ArticlesAsongu, Simplice A., and Joseph Nnanna. 2019. “Foreign Aid, Instability, and Governance in Africa.” Politics & Policy 47(4): 807–48. https://doi.org/10.1111/polp.12320.Dobransky, Steve. 2014. “Violators amongst Us: International Regimes and the Role of Compliance, a Case Study on Official Development Assistance.” Politics & Policy 42(4): 593–634. https://doi.org/10.1111/polp.12082.Scarlato, Margherita, and Giorgio d'Agostino. 2019. “The Political Dimension of Cash Transfers in Latin America and Sub‐Saharan Africa: A Comparative Perspective.” Politics & Policy 47(6): 1125–55. https://doi.org/10.1111/polp.12332.

Foreign Aid and Direct Effect of Poverty Reduction in Thailand

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.

Effectiveness of foreign aid in agricultural development in the Adaklu District of Ghana: a case study of the Modernizing Agriculture in Ghana (MAG) Fund

Effectiveness of foreign aid in agricultural development in the Adaklu District of Ghana: a case study of the Modernizing Agriculture in Ghana (MAG) Fund

Analysing the effect of foreign aid on industrialization: Evidence from Africa

The importance of industrialization as an engine of economic growth and structural transformation has been largely documented. Despite the benefits of industrialization, Africa has witnessed a de-industrialization in recent decades. This means that some important determinants of industrialization remain unidentified in Africa. This study fills this gap by analysing the effect of foreign aid on industrialization in 42 African countries over the period 1995–2021. Using the two-step system Generalized Method of Moments, the following results are established. First, on average, foreign aid hurts industrialization in Africa. Second, the effect of foreign aid depends on the nature of the aid since education and energy aid improve industrialization while health and humanitarian aid negatively affect it. Third, we find a U-shaped relationship between foreign aid and industrialization. Interestingly, democracy and human capital can mitigate the negative effect of foreign aid on industrialization. These results have strong economic policy implications for African countries, showing that they should put in more effort to strengthen their level of democracy and human capital in order to enjoy the positive effect of foreign aid on industrialization. Finally, this research contributes to the development of aid distribution plans that support African nations' industrialization.

Assessing economic effects of foreign aid and capital flows on real economic growth

The study sought to investigate the effect of foreign aid and capital flow on real economic growth for the SADC region. Eleven member states of the SADC region are selected for analysis based on data availability. In the study, foreign aid is represented by official development assistance (ODA), external debt (EXTD), and debt service cost (DSC) while the inflow of foreign direct investment represents capital flow (FDI). Annual percentage growth of per capita Gross Domestic Product (GDPpc) is used as a proxy of real economic growth. Trade balance (TRO) is included in the model regression as a control variable. The study employed panel econometric models. The results of panel ARDL indicate that ODA and FDI were found to have a negligible effect on real growth in the short run but contribute positively and significantly in the long run. This revelation supports the view that ODA and FDI are essential determinants of growth. On the other hand, EXTD together with its associated costs was found to have a detrimental effect both in the short run and long run. Based on the results of the study, the authors put forward the following policy recommendations for the SADC region: most importantly, there ought to be effective management of external debt by SADC countries to reduce their overdependency on external debt for their domestic needs. Given the positive effect of FDI in the region, the SADC region needs to intensify its efforts in devising measures that will attract foreign investors to the region which among others include pursuing inclusive and sustainable economic growth. Lastly, there is a need for effective management and official development aid to ensure sustainable growth.

The roles of inflation and financial development in the effectiveness of foreign aid: Evidence from Bangladesh

The long-run economic benefits of foreign aid in a recipient country depend on the absorptive capacity of the nation in terms of institutions, macroeconomic stability, and financial development. While the role of institutional quality on the aid-growth nexus has already been empirically determined, the moderating roles of inflation and financial development have not been investigated. Therefore, our study addresses these research gaps by examining the moderating roles of inflation and financial development on the impact of aid on economic growth in Bangladesh during 1980–2020 period. It utilizes the Autoregressive Distributed Lag (ARDL) bounds testing technique. This study reveals that the impact of aid on growth depends on the levels of inflation and financial development. If inflation rises above 9.85% threshold level, the marginal effect of aid on growth turns negative. In contrast, the marginal effect of aid on growth is positive even at the maximum level of financial development. The outcomes are robust to alternative proxies and structural breaks. The implication is that an increase in aid and financial development boosts economic growth, but high inflation limits the efficacy of aid. Therefore, to reap the long-term economic benefits of aid, countries should embrace the requisite macroeconomic stability and financial development.

Foreign Aid and Corruption: Do Women Make the Difference?

AbstractThe longstanding debate on the effectiveness of foreign aid has largely concluded that corruption is one of the major reasons for the failure of aid to sustain development in recipient countries. This paper investigates whether greater involvement of women in recipient countries' political and economic life enhances the effectiveness of foreign aid by reducing the corruption that usually accompanies massive foreign aid. The hypothesis is tested by cross-country empirical analysis, addressing the potential endogeneity of aid and women’s participation using an IV approach. We provide robust and causal evidence that greater women’s political and labor market participation does reduce the corruption associated with foreign aid, especially when the aid targets sectors that enhance women’s well-being. Moreover, we find that while all the dimensions of women's social participation are effective in reducing corruption, the greatest effect derives from the political dimension.

Foreign aid impact on the economic growth of the Western Balkans during 2009–2021

PurposeThe purpose of this study is to investigate the role of foreign aid in the Western Balkans countries’ economic growth between 2009 and 2021.Design/methodology/approachThis paper uses a panel data approach to examine the effects of foreign aid on economic growth in the region and incorporates a random-effects model to accommodate the unique cross-country variations and time-specific factors, as well as a pooled OLS and fixed-effects model for a comprehensive, comparative analysis.FindingsThe in-depth regression analysis shows that foreign aid has not had a significant impact on the economic growth of the region. Further evidence suggests that trade openness exhibited a significant positive correlation with economic growth, while gross capital formation, although positively associated, did not significantly impact it, indicating the complexity of its role in the region’s economies.Practical implicationsThe analysis presented in this study has significant practical implications, particularly for policymakers in the Western Balkans. Given the region’s ambitions for European Union membership and the challenges of high unemployment and inflation, understanding the role of foreign aid is crucial.Originality/valueThis research provides a unique contribution to the field of development economics by examining foreign aid effectiveness within the context of a region often overlooked in the literature. The analysis also offers fresh insights into the complex dynamics of foreign aid and its implications for policy and development strategies.

The Effect of Foreign Aid on Health Outcomes in Nigeria: A Case Study of Lagos State Teaching Hospital

The paper examined the effect of foreign aid on health outcomes in the Lagos State Teaching Hospital in Nigeria. The purpose of the study was to uncover the actual effect of foreign aid inflows on health outcomes in Nigeria. The paper employed a quantitative research methodology which explored secondary resources from WHO publications, journals and thesis on foreign aids and their contribution to health outcomes in developing countries especially Nigeria, and other official reports, and statistical bulletins. Qualitative methodology was also applied in this research. A semi-structured questionnaire was administered within the Lagos State Teaching Hospital, with a sample population of 50 healthcare personnel. The qualitative methodology was adopted to give a holistic view of the research study based on the concepts of the literature review, and to fully understand the situation of the topic under study in the country. One of the situation which the paper found out, is that Nigeria have received substantial amount of foreign aid and yet these amount of foreign aid is still considered to be low given the huge healthcare issues in Nigeria. The paper also revealed that, the foreign aid received through the Government in the country have been largely ineffective in addressing the health issues of Nigeria. This could be as a result of the lack of balance between the health challenges in Nigeria and the rate at which these aids are used to fund it. Lack of appropriate policies on disbursement rate of foreign aids to various health cases such as tuberculosis, malaria, HIV/AIDS, and others, could be the case for the perception of how low foreign aids are to the issues of healthcare. This is, without the articulation of the corruption laced on handling of foreign aids in Nigeria. The paper finally revealed foreign aid has a positive impact on the Nigeria health outcomes especially in the area of maternal health, but grossly ineffective in other areas. The study recommended that, the Nigeria government should ensure that foreign aid meant for the health sector is not diverted to other sectors and that; foreign aid dedicated to the health sector should be used judiciously

Analysis of the Moderating Roles of Human and Physical Capital on the Impact of Foreign Aid on Economic Growth in Nigeria

Though the impact of foreign aid on economic growth has been examined in several studies, the roles of human and physical capital in aid-growth nexus has not been investigated. This is important because the effectiveness of foreign aid could be contingent upon the absorption capacity of the recipient country. We fill this research gap by examining the moderating roles of human and physical capital on aid-growth nexus in Nigeria during 1980 to 2020. Our study deploys the Autoregressive Distributed Lag approach on the interaction models. It shows that the variables are cointegrated. Though aid has a positive impact on growth, human and physical capital have significant moderating roles on the impact of aid on growth. Precisely, the marginal effect of aid on growth varies with the levels of human and physical capital. However, if human and physical capital surpass the threshold levels of 55% and 65%, respectively, an increase in aid cannot accelerate growth. These findings are robust to alternative proxies, structural breaks as well as diagnostic tests. This research implies that, given the requisite levels of human and physical capital, foreign aid can complement domestic capital to enhance growth. Hence, for nations to obtain the long-term benefits of aid, they should create the enabling environment by adequately investing in human and physical capital to attain sustainable economic development. JEL Classification: O47; F35; E22; J24

The Effectiveness of Foreign Aid in the Sphere of Media and Information Literacy in Central Asian Countries

The Effectiveness of Foreign Aid in the Sphere of Media and Information Literacy in Central Asian Countries

The Effects of Foreign Aid and Foreign Direct Investment on Human Capital Development in Nigeria: Evidence from 1990 to 2018

The Effects of Foreign Aid and Foreign Direct Investment on Human Capital Development in Nigeria: Evidence from 1990 to 2018

Effectiveness of Foreign Aid on Economic Growth of Nepal

This study investigates the impact of foreign aid on the economic growth of Nepal from 1975/76 to 2021/22, with a focus on the association between foreign aid and private investment. The research utilizes secondary data from the National Reserve Bank (NRB), Ministry of Finance (MOF), Central Bureau of Statistics (CBS), and other related government agencies. The study employs the models to analyze the impact of foreign aid on economic growth and investment in Nepal. The Ordinary Least Square (OLS) method is used to establish a simple relationship between the variables under study. The study reveals that foreign aid positively affects the GDP growth of Nepal and is inversely related to private investment. Based on these findings, the following recommendations are made:
 Foreign aid plays a significant role in the development of some categories of people in Nepal, but most rural people do not benefit directly due to the ineffective use of foreign aid. The government should focus on improving the efficiency of foreign aid utilization to maximize its benefits for the entire population.
 The government should prioritize projects and initiatives that promote economic growth and private investment, as these efforts can help create a more sustainable and prosperous future for the country.
 In conclusion, this study highlights the importance of foreign aid in the economic development of Nepal and provides insights into the relationship between foreign aid, economic growth, and private investment. By implementing effective policies and strategies, the government can leverage foreign aid to foster economic growth and improve the lives of the Nepali people.

The effect of foreign aid on carbon emissions in recipient countries: Evidence from China

Foreign aid is an essential tool in economic diplomacy tool, yet its significance in global environment governance often goes underestimated. Taking 118 countries that received Chinese foreign aid from 2000 to 2018 as the research objects, this study investigated the impact of foreign aid on the carbon emissions of recipient countries and the mechanism. Firstly, the present study found that Chinese foreign aid increased the overall carbon emission levels of recipient countries during the sample period, with each 1 % increase in Chinese foreign aid being followed by a 0.0148 % increase in the carbon emissions of recipient countries. Secondly, the improvement of the economic growth and technological innovation of recipient countries served a mediating role in the process of Chinese aid affecting the carbon emissions of recipient countries. Thirdly, the threshold test results indicate that Chinese foreign aid helps to reduce the carbon emission levels of recipient countries when their economic growth rates and technology innovation levels are low, noting that this emission reduction effect may weaken as the recipient countries' economic growth rates and technological innovation increase. The findings of this paper expand the literature on the functional theory and non-economic consequences of foreign aid. Moreover, they told significant theoretical and policy implications for promoting cleaner aid practices and fostering low-carbon, green growth in recipient countries.