Aid, Growth, and Development: Have We Come Full Circle?

Channing Arndt, Sam Jones, and Finn Tarp
  • 1 University of Copenhagen
  • 2 University of Copenhagen
  • 3 University of Copenhagen and UNU-WIDER

The micro-macro paradox has been revived. Despite broadly positive evaluations at the micro- and meso-levels, recent literature doubts the ability of foreign aid to foster economic growth and development. This paper assesses the aid-growth literature and, taking inspiration from the program evaluation literature, we re-examine key hypotheses. In our findings, 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. Aid remains a key tool for enhancing the development prospects of poor countries.

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