Aid Proliferation and Economic Growth: A Cross-Country Analysis

SummaryWe examine whether aid proliferation hinders economic growth by applying the standard aid-growth regression to Roodman’s (2007) dataset, with proper correction for possible biases arising from omitted variable and endogeneity problems. Specifically, we include a donor-concentration index to capture a low degree of donor proliferation and its interaction terms with aid variables as additional independent variables. Our empirical results show that the effect of aid concentration on economic growth is positive and favors the hypothesis that aid proliferation has a negative effect on the economic growth of recipient countries, especially in Africa.