GER

We analyze the growth impact of official development assistance to developing countries. Our approach is diff erent from that of previous studies in two major ways. First, we disentangle the effects of two components of aid: a developmental, growth-enhancing component, and a geopolitical, possibly growth-depressing component. Second, our specifi cations allow for the effect of aid on economic growth to occur over long time-lags. Our results indicate that developmental aid promotes long-run growth. Th e effect is large and robustly significant, and withstands an array of robustness checks including alternative specifications, choices of the proxy for development aid, and treatments of outliers.
Aid and Growth: What Does the Record Show? -- The Problem of Endogeneity -- Limitations of the Predominant Strategy for Addressing Endogeneity: Does Aid of Different Types Have Different Effects? -- The Specification Problem: Theoretical Results -- Empirical Findings (cross-section) -- Empirical Findings (panel) -- Further refinements and robustness checks -- Conclusions.

34 p. : graphs, tables

Includes bibliographical references (p. 17).