8 December 2017

DERG research tops most downloaded paper list in Journal of Globalization and Development for seven years

A study published in 2010 by Sam Jones and Finn Tarp from the Development Economics Research Group (DERG) at the Department of Economics in collaboration with Channing Arndt (now at IFPRI) has been the most downloaded research paper from the Journal of Globalization and Development during the last seven years.

The paper titled “Aid, Growth, and Development: Have We Come Full Circle?” is one among the many outputs from DERG’s work on foreign aid and development. It employs a very carefully developed empirical strategy to address the aid-growth literature and marks a break through from the bleak pessimism of some of the earlier literature and associated policy implications.

Have we come full circle?

The findings show that aid has a positive and statistically significant causal effect on growth over the long run, with confidence intervals conforming to levels suggested by growth theory. An inflow in the order of 10 percent of GDP spurs the per capita growth rate by more than one percentage point per annum in the long run. These estimates are consistent with the view that foreign aid stimulates aggregate investment and may also contribute to productivity growth, despite some fraction of aid being allocated to consumption. So: “Aid works” also at the macro-level.

To conclude, the authors respond to the question posed in the title of the paper: has the aid, growth, and development literature gone full circle? Their answer is “no”. Aid has been and remains a very effective tool for enhancing the development prospects of poor nations. But of course aid alone cannot do the job.

You can read the entire paper here