Development Aid to Agriculture and Economic Growth

The link between foreign aid and economic growth has been a controversial issue with no strong consensus so far. This paper argues that a possible reason why some studies may conclude that aid is ineffective in promoting economic growth might be that not all aid is given for development purposes (i....

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Bibliographic Details
Published inReview of development economics Vol. 16; no. 2; pp. 230 - 242
Main Authors Kaya, Ozgur, Kaya, Ilker, Gunter, Lewell
Format Journal Article
LanguageEnglish
Published Oxford, UK Blackwell Publishing Ltd 01.05.2012
Subjects
Agricultural development
Agriculture
Barro, Robert J
Developing countries
Development aid
Economic growth
Foreign aid
Generalized method of moments
LDCs
Regression analysis
Studies
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Summary:The link between foreign aid and economic growth has been a controversial issue with no strong consensus so far. This paper argues that a possible reason why some studies may conclude that aid is ineffective in promoting economic growth might be that not all aid is given for development purposes (i.e. aid given for strategic considerations, humanitarian reasons or emergency relief). This study classifies foreign aid into four subcategories: agricultural aid, social infrastructure aid, investment aid, and non‐investment aid. Using the generalized method of moments (GMM) estimation technique on a Barro type growth regression with panel data from the aid recipient economies, this paper finds that when aid is directed to the agricultural sector of the developing countries, it is positively and significantly related to growth and can affect economic growth in the short run.
Bibliography:istex:19CB55C270E9D3D80A50BFF412D25D9A4680FC2A
ArticleID:RODE658
ark:/67375/WNG-W29ZLXVG-J
The authors wish to thank Glenn Ames, Kwan Choi, Jack Houston, and an anonymous referee for their helpful comments.
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ISSN:1363-6669
1467-9361
DOI:10.1111/j.1467-9361.2012.00658.x