The ineffectiveness of development aid on growth: An update

This note deals with a paradox: A literature growing exponentially even though it keeps finding the same (disappointing) results. We draw upon 1217 estimates of aid effectiveness of which 676 are reported in recent years, to examine three subjects: (S1) Has the literature finally overcome the aid ineffectiveness result? (S2) Increasingly studies try to adjust for simultaneity bias. Has the evidence shown the existence of this bias? To these two questions the answer remains “no”. However, (S3) new evidence suggests that some aid components may have a positive effect on growth. This is a promising new result, but it is not yet confirmed by independent replication.

► Reported results on aid effectiveness have doubled between 2005 and 2010. ► However the research effort has not overcome the aid ineffectiveness result. ► The new standard practice to adjust for simultaneity shows no simultaneity. ► Unconfirmed but promising new results show that some aid components affect growth.