Foreign aid, institutional quality, and growth

Andrew T. Young, Kathleen M. Sheehan

Research output: Contribution to journalArticlepeer-review

53 Scopus citations

Abstract

Using a panel of up to 116 countries from 1970 to 2010 we estimate the effects of foreign aid flows on a variety of measures of institutional quality. We find that aid flows are associated with the deterioration of both political and economic institutions. Regarding the latter, aid flows are associated with deterioration in a recipient's legal system and property rights, as well as its openness to international trade. Controlling for both political and economic institutions in growth regressions, the latter is robustly, positively associated with growth. After controlling for institutional quality, aid flows are not otherwise significantly related to growth.

Original languageEnglish
Pages (from-to)195-208
Number of pages14
JournalEuropean Journal of Political Economy
Volume36
DOIs
StatePublished - Aug 10 2014

Keywords

  • Economic development
  • Economic growth
  • Economic institutions
  • Foreign aid
  • Institutional quality
  • Political institutions

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