Effect Of Foreign Aid Research Articles

Gender‐focused or gender mainstreaming programmes? The gender dimension of international aid

AbstractAid in support of gender equality and women's empowerment has gathered significant momentum over the past decade and has also sparked a renewed debate over the effectiveness of foreign aid. Is gender aid a panacea that will help the recipient countries confront the challenges of the gender inequality deeply ingrained in their societies, or is it just a placebo pretending to be effective? Is there any difference between gender‐focused aid and gender mainstreaming aid in terms of aid effectiveness? To answer these key questions, this article examines the impact of gender aid on gender inequality using a sample of 116 recipient countries that covers the period from 2010 to 2019. By adopting a hybrid method that incorporates fixed‐ and random‐effects models, we obtain results indicating that increasing amounts of gender mainstreaming aid over time successfully reduce gender inequality and close the gender gap. In stark contrast, gender‐focused aid lacks the statistical significance needed to prove its potency. In addition to confirming gender aid's effectiveness, this article provides further policy implications regarding the gender mainstreaming strategy in the field of international development, particularly when considered in the context of the 2030 Agenda for Sustainable Development.

New Citizen Forms of Solidarity in Zimbabwe’s Crisis-Stricken Context

The real effectiveness of foreign aid or overseas development assistance is evident in the improvement of the livelihoods of the recipients for the better. There have been numerous debates and discussions around the extent to which foreign aid brings about true development for countries in the global south. In the case of Zimbabwe, foreign aid and its reduction have been linked to the political standoff between the country and the west, particularly after the implementation of the controversial land reform program. Coupled with a protracted economic crisis that has stretched for over 20 years, the expectation was for the country to completely collapse. However, this has not been the case. Citizens found ways or alternatives to continue with their lives and develop mechanisms of resilience and solidarity that allowed them to keep on going even amid the political and economic crises of the last 22 years. How did they do this and what role can this play in advancing a more inclusive society and approach to development This paper explores this question.

Promoting Renewable Energy Consumption in Sub-Saharan Africa: How Capital Flight Crowds-Out the Favorable Effect of Foreign Aid

Promoting Renewable Energy Consumption in Sub-Saharan Africa: How Capital Flight Crowds-Out the Favorable Effect of Foreign Aid

Effectiveness of Foreign Aid and Human Development.

Foreign aid has been contributory towards fostering broad-based development and complementing national development initiatives in the recipient countries. This paper analyses the question of aid effectiveness towards the achievement of goals in the special context of a set of social outcomes in Pakistan. More specifically, the paper focuses the core question that ‘how’ and ‘how far’ foreign aid has affected the ‘health’, ‘education’, and overall ‘human development index’ in Pakistan. Our result shows that there is feedback Granger causality between GI and ODA. That is, Economic growth induces ODA and ODA Granger cause economic growth. As far as Education index, Human development index and life expectancy index concerned, there are only unidirectional Granger causality from ODA to Education index, Human development index and life expectancy index. This is consistent with other literature that ODA contribute to human development. JEL classification: O15, P45 Keywords: Effectiveness, Human Development, Foreign Aids, Granger Causality

Foreign Aid—Blessing or Curse: Evidence from Pakistan

The role of foreign aid in promoting economic growth is a debatable issue and remains unsettled at both theoretical and empirical levels. Pakistan has received a substantial amount of foreign aid since its Independence in 1947 but little improvement has been observed in its socio-economic development. This study considers the question as to whether foreign aid is a blessing or a curse for Pakistan. The empirical analysis is based on the ARDL cointegration approach. We examine the aid-growth link at the aggregate and disaggregate levels for the period 1972-2006. The results show negative and insignificant effects of foreign aid on the growth at the aggregate as well at the disaggregate level. The findings further suggest that domestic investment, export growth, and inflows of foreign direct investment are important contributors in enhancing economic growth in Pakistan.

Aid and social cohesion

A plethora of work has been done on the effectiveness of foreign aid. However, virtually none of the previous cross- country macro studies have investigated the impact of aid on social cohesion. Yet, in order to promote the achievement of the targets in SDG 16, donors and global partners of developing countries have put emphasis on social cohesion in recent decades. As a result, large amounts of development aid have been channeled into many developing countries to support the building of peaceful, just, and inclusive societies. The question is, however, can aid bolster cooperation and respect among different identity-based groups in a country? We contribute to the literature by exploring the effect of development aid on social cohesion for a relatively large panel of aid-recipient countries. Our empirical results suggest that foreign aid has a strong, positive, and significant relationship with social cohesion. Moreover, the results reveal that in less cohesive countries aid is positively and significantly associated with social cohesion; but this relationship becomes insignificant, statistically, in more cohesive societies. The main results are robust to various specifications, estimation procedures, and measures of aid used.

Foreign Aid and Donor's Exports to the Recipients: The South Korean Case

This paper examined the relationship between foreign aid and export, for the case of Korea from 1965 to 2015. I argue that foreign aid promotes donor's export to the recipient for following reasons: (1) the explicit and implicit tied-aid agreements directly increase export; and (2) implementing aid policy involves transferring not only money but also people. Thus, it serves as building the political, economic, and social relationships between donor and recipient countries. Those spillover effects of foreign aid can increase the export of donor countries. By applying a dynamic gravity model with GMM estimators, I provided empirical evidence that Korean bilateral ODA is positively related to its export to the recipients. The result showed that the impact of Korean ODA on its exports is positive and more significant in the post-1990s. In specific, for the later period, a percentage increase in Korean bilateral aid is associated with 0.095% increase in export in the short-term and 0.22% increase in export in the long run.

Effectiveness of Foreign Aid in Poverty Reduction in Africa: The Role of Fiscal Policy

This study examines foreign aid effectiveness in poverty reduction in Africa with focus on the role of regional fiscal policy on education and health. The study employs panel dynamic ordinary least squares (DOLS) estimation technique and covers the period 1980-2017. The results reveal that foreign aid augmented with effective fiscal policy on education significantly improves the income level in all the regions except Central Africa, and consumption in the Western and Central regions. When augmented with effective fiscal policy on health foreign aid enhances households’ income in West and Central Africa and consumption in West and Southern regions. Furthermore, foreign aid augmented with effective fiscal policy in education (health) reduces poverty headcount in the West and Central (in all regions except Central) regions of Africa. The study concludes that foreign aid augmented with fiscal policy on education improves income in all regions except Central Africa; and West and East Africa when augmented with health expenditure. To sustain the effectiveness of foreign aid in Africa there is the need to improve governments’ allocation to the health and education sectors to deepen households’ income.

The Social Effects of Chinese Foreign Aid

Nowadays, there is widespread skepticism, misunderstanding, and misinterpretation regarding China’s foreign aid to developing countries, and very few studies have been devoted even to the question of whether China’s aid causes the occurrence of civil conflicts in recipient countries. Existing knowledge, mechanisms, practices, and even values and goals of China’s foreign aid remain incomplete. This paper therefore examines the effects of Chinese foreign aid (broken down into project aid and development loans) on the incidence of civil conflict in Africa between 2000 and 2014. Analyzing the extent to which disaggregated Chinese foreign aid affects the incidence of civil conflict in Africa from 2000 to 2014 using annual country-specific data from AidData, the Uppsala Conflict Data Program, World Bank National Account Data, Atlas Narodov Mira, and Ethnic Power Relations Dataset by conducting probit regression analysis, we found that the categories of development loan aid have explanatory power in reducing the incidence of civil conflict in a recipient country. This study concludes that Chinese foreign aid, especially Development loan aid that flowed to African countries during the study period, has explanatory power for reducing civil conflict. This study therefore seeks to contribute to scholars and policymakers by identifying the effectiveness of specific aid components that serve as key tools for donor countries to manage aid flows.

Sustainable Agriculture and Rural Poverty Eradication in Pakistan: The Role of Foreign Aid and Government Policies

For decades, agriculture has been central to economic growth and development in Pakistan. However, endemic rural poverty hinders the performance of agricultural production, and thus deteriorates the sustainable development perspectives of the agricultural sector and the entire country. The need for agricultural reform emphasizes raising farmers’ incomes as a cornerstone of the sustainable development of rural areas, and this study attempts to reveal the effects of foreign aid and government policies on the level of rural poverty in Pakistan. In total, 384 farmers from major agricultural areas of Pakistan completed the survey-based questionnaire. The partial least square structural equation modelling technique tested the results. They, using sustainable agriculture practices, improved agricultural production positively and significantly. Agriculture production positively and significantly reduces or mitigates poverty. This study aimed to reveal the role of foreign aid in sustaining agricultural production and eradicating rural poverty. Foreign aid positively moderated the association between sustainable agriculture practices and agricultural production. In addition, government policies negatively, yet insignificantly, moderate the association between agriculture production and poverty reduction. Furthermore, the findings indicate that agriculture production positively and significantly mediates the association between sustainable agriculture practices and poverty reduction. The study contributes to the literature by improving the understanding of linkages within the poverty-policies-aid-sustainability framework.

Foreign Aid and Fiscal Policy in a Small-Open Economy with a Non-Market Sector

This study examines the macroeconomic effects of foreign aid and fiscal policy by employing a multi-sector growth model. Foreign aid may decrease the recipient country’s market activities by lowering its capital accumulation and shifting market labour and capital to the non-market sector. This market activity shifting can improve the recipient country’s foreign asset/debt position where real exchange rate plays a role. We examine fiscal policies’ long- and short-run impacts and the recipient country’s administration efficiency in handling aid. Efficiency improvements in the recipient country’s governance of foreign aid can lower its real exchange rate, thereby contribute to improving foreign asset/debt holdings. Although administration costs in foreign aid may cause losses, by raising both market and non-market goods consumption, foreign aid improves the welfare of the recipient country. Our numerical analysis demonstrates the comparative statics and comparative dynamics impacts of several fiscal policy experiments. We illustrate that capital and labour income’s taxation effects can be very different.

Effect of sectoral foreign aid allocation on growth and structural transformation in sub-Saharan Africa—Analysing the roles of institutional quality and human capital

The study analyses the effectiveness of aggregate as well as sectoral foreign aid on growth and structural transformation for 32 sub-Saharan African (SSA) countries over the period from 2002 to 2019. For this purpose, a structural transformation index (STI) has been constructed using the value-added and employment shares of the economy. There is a lack of studies in the aid effectiveness literature that examine the effects of sectoral aid on overall growth and development of the economy. Comparing the effectiveness of different types of aid on growth and structural transformation is a novel approach. In this analysis, we also take into account the roles of institutional quality and human capital on aid effectiveness. To this end, we have used Driscoll–Kraay Fixed-Effect estimators, Fixed-Effects Panel Threshold regression and Method of Moments Quantile regression to analyse the effectiveness of aggregate and sectoral foreign aid. Our estimation techniques are robust to cross-sectional dependence and slope heterogeneity. We find that both agricultural and social-sector aid have positive significant effects on growth but negative significant effect on structural transformation. This suggests that foreign aid should be increased in these sectors, conditioned by the level of institutional quality. Human capital is found to increase the effectiveness of foreign aid. Aid to economic infrastructure is the only type of aid which is found to increase structural transformation significantly. This study helps in designing aid allocation strategies, so as to promote both growth and structural transformation in the SSA countries.

Does External Debts Affect Economic Growth: The Case of E7 Countries

Developing countries, which mostly face financing problems, often have to use external debt. On the one hand, external debt stands out as an important source of financing investments, but on the other hand, due to inefficient use or administrative failures, it may harm the macroeconomic indicators of countries, rather than benefit, with parameters such as exchange rate, bad governance and corruption. One of these macroeconomic indicators is undoubtedly economic growth. In this context, the effect of external debt on growth is discussed for the E7 countries in the 1992-2020 period. First of all, the relationship between external debt growth was examined using Westerlund cointegration analysis. According to, there is a long term co-integration relationship between foreign debt and economic growth in E7 countries. Common Correlated Effects Estimator (CCE) and Augmented Mean Group Estimator (AMG) models were used for the coefficient estimation. The findings obtained from both models indicate that external debt negatively affects growth.When the findings are analyzed by country, according to the AMG model, foreign aid affects growth negatively in China, India, Russia, Brazil and Mexico. According to the CCE model findings, foreign aid negatively affects growth in India, Brazil, Mexico and Indonesia. However, according to the findings of both models, the effect of foreign aid on growth in Turkey is statistically insignificant. Panel group analysis results support the debt overhang hypothesis for E7 countries

Effects of foreign aid and energy aid inflows on renewable and non-renewable electricity production in BRICS countries.

We empirically examine the effects of overseas aggregate aid and energy aid inflows on renewable and non-renewable electricity production in selected BRICS countries (i.e., Brazil, India, China, and South Africa) from 1995 to 2015. Economic growth, foreign direct investment inflows, and trade openness are control variables in electricity production functions. The results from employing fully modified ordinary least square and dynamic OLS techniques indicate that economic growth, inflows of aggregate aid, energy aid, and foreign direct investment promote renewable electricity production, while trade openness reduces it. We also find that aggregate aid and energy aid inflows reduce the non-renewable electricity production, while economic growth, foreign direct investment inflows, and trade openness promote it. Moreover, our study is unique and adopts different panel estimators, ensuring the robustness of the research findings. Our findings suggest that the BRICS economies' march towards a sustainable environment becomes possible if policymakers, in their climate mitigation policy, encourage greater investments of overseas aggregate aid and energy aid inflows toward renewable electricity production.

Does China’s Aid Promote Recipient Countries to be Embedded in Global Value Chains

ABSTRACT Although aid is an important tool for facilitating the integration of developing countries into global value chains (GVCs), there is lack of empirical research to support this view. This study thus examines the impact of China’s aid on the development of GVCs in recipient countries. The conclusions of this study are as follows: (1) China’s aid can significantly promote recipient countries to transform into GVCs. (2) The improvement of infrastructure in recipient countries is the main channel through which China’s aid affects the degree of integration of recipient countries’ GVCs. (3) Aid type, technology distance, and trade complementarity have a certain heterogeneity in the current study’s research results. From the perspective of GVCs, this study proves the effectiveness of foreign aid in the economic development of recipient countries and helps expand the research boundary of foreign aid.

RETRACTED: Foreign Assistance, Sustainable Development, and Commercial Law: A Comparative Analysis of the Impact of Corruption on Developing Economies

The essential purpose of this research is to investigate the relationship between foreign assistance and economic growth. It also analyzes the role corruption might play in influencing this relationship in aid-recipient countries that have similar real gross domestic product (GDP) per capita, but different development patterns. An analysis is performed on specific samples from 2000 to 2019. The model is split into three sections for this purpose: i.e., all developing economies, sub-Saharan Africa (SSA), and the most corrupt countries from regions other than SSA. The difference generalized method of moments (GMM) panel framework is used for empirical analysis. The study concludes that foreign aid does not result in encouraging and significant changes in overall economic growth in developing economies. By contrast, corruption has a powerful impact on foreign aid effectiveness. It is also observed from the analysis that SSA economies receive high levels of foreign assistance, but still cannot extract maximum benefit due to various economic and social problems. Furthermore, foreign assistance effectiveness is almost insignificant in most corrupt economies from other regions.

Does foreign aid reduce the country's risk of OFDI? The Chinese experience

AbstractUsing a sample of 124 countries assisted by China from 2000 to 2019, this paper examines the impact of foreign aid on outward foreign direct investment (OFDI) and the mitigation mechanism of risk. The research finds that, first, foreign aid can significantly reduce the country risk of recipient countries, especially political risk and financial risk, and thus play a role in promoting the inflow of OFDI of donor countries, and there is a lagged effect of this role; Second, foreign aid from other countries has a negative impact on China's OFDI to recipient countries, indicating that foreign aid is nonaltruistic and exclusive; Third, the mitigation effect of foreign aid on country risk is achieved through five channels: compensation effect, synergistic effect, pioneer effect, assimilation effect, and redistribution effects.

Predictability of foreign aid and economic growth in Ethiopia

Foreign aid is one source of physical capital accumulation in Ethiopia. It is also a main media of government revenue in meeting increasing trends of government expenditure. To investigate the impact of foreign aid flow on economic growth, various empirical studies were conducted, but they came up with mixed result. This leads to raise question of why impact of aid on economic growth in Ethiopia continues to be paradoxical in its findings. To assess the effectiveness of foreign aid in Ethiopia; this study sets predictability of foreign aid and economic growth in Ethiopia as a general objective. Specifically, the study sought to examine the contribution of foreign aid and the macroeconomic policy environment to economic growth in the country. In order to meet the aforementioned objective, the study employed an autoregressive distributed lag (ARDL) approach over the period 1985–2019. The empirical finding shows that foreign aid has a positive role in economic growth in the long run but its short run effect is found to be insignificant. Again, this finding also reveals that both in the short run and long run the predictability of foreign aid has a positive effect both on economic growth. Macroeconomic policy index also has a positive effect in the long run, but its short run effect become negative. Based on the listed empirical finding, the study came up with policy recommendation; the government should allocate the external assistance on the successful development projects rather than simply on consumption. Furthermore, for the persistent and predictable flow of foreign aid overtime, joint mechanism of transparency has to be developed between Ethiopian government and donor communities.

Aid effectiveness: Human rights as a conditionality measure

The ‘aid conditionality’ hypothesis as documented in the literature suggests that aid is effective in augmenting growth only in the presence of a sound policy environment. This hypothesis was so influential that its policy recommendation, to provide aid conditional upon recipient domestic policies, is currently the dominant ODA allocation criterion. However non-economic dimensions of development (political and institutional) are increasingly seen as fundamental. For this reason, this paper focuses on the linkage between aid and a non-economic factor like Human Rights (reflecting repression and corruption) as a measure of aid effectiveness, in explaining growth outcomes across 42 Least Developed economies. We find that countries with better protection of human rights experience positive growth from aid receipts, signifying the role of stronger institutions in enabling more effective use of aid. The paper thus concludes that the measurement and monitoring of human rights provision is a useful tool in gauging the likely effectiveness of foreign aid.

An Empirical Investigation into the Contribution of Foreign Aid to Economic Growth in Developing Countries: Exploring the Role of Democracy

The significance of the study lies in the fact that this study will enable developing countries to find the benefits that they can get by establishing and strengthening democratic institutions in order to augment the positive effects of foreign aid for their economic growth. This study aims to explore the role of democracy in determining the effectiveness of foreign aid in economic growth. This study utilizes the growth rate of real GDP as an explained variable while foreign aid (FAID), official development assistance (ODA), Political regimes (DEM), gross capital formation (GCF), real financial consumption expenditures (GFCE), and Consumer price index (CPI) are used as explanatory variables. For this, the present study uses the panel data of selected developing countries for the period of 2006 to 2018. The results of the generalized method of moments (GMM) indicate that foreign aid is not beneficial for the economic growth of selected countries whereas, democracy is favorable for higher economic growth. When foreign aid is granted to democratic countries, it accelerates economic growth. Hence, the policy makers of donors’ institutions should consider the democratic attributes to make decision about foreign aid towards developing countries.