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Center for Global Development provides a different take on aid/growth relationship

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  • Holden Karnofsky
    A Primer on Foreign Aid by Stephen Radelet ( http://www.cgdev.org/content/publications/detail/8846/) reviews the aid/growth literature on pgs 8-11, and is
    Message 1 of 1 , Dec 29, 2008
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      "A Primer on Foreign Aid" by Stephen Radelet (http://www.cgdev.org/content/publications/detail/8846/) reviews the aid/growth literature on pgs 8-11, and is more optimistic than Easterly:
      • Acknowledges that several studies (5 are cited) have found no relationship between growth and aid.
      • Gives an interesting review of the "aid helps growth under certain conditions" literature.  
        • Several studies have found that aid appears to stimulate growth "in countries with good policies, but not otherwise," and Radelet states that this view is now "conventional wisdom," but also mentions that the studies tend to have rather "fragile" results (i.e., highly sensitive to various assumptions).
        • "to date there has been very little systematic research connecting specific donor practices to aid effectiveness."
        • One study found that "aid that is directly aimed at affecting growth (building road,s ports, and electricity generators, or supporting agriculture" has a more positive effect on growth.
      • Claims that studies that allow for diminishing returns to aid (rather than looking for a strictly linear relationship to growth) have generally found positive effects; cites 7.
      Neither the Easterly review nor this one is fully explicit about its methods for selecting papers to include.  Each cites papers that the other doesn't.  These reviews are therefore useful in seeing who thinks what, but ultimately we are going to want to cite a clearer literature review on a question like this.  The Radelet paper cites 2 literature reviews as its source material (page 8 note 7) and I've noted these to possibly look at later.

      Another interesting quote from this paper, though unreferenced:

      Large countries, such as Bangladesh, Indonesia, Nigeria, and Pakistan receive relatively small amounts of aid on a per capita basis, even though hundreds of millions of people live in poverty in these countries. By contrast, some small countries receive very large amounts. For political reasons, donors generally want to influence as many countries as possible, which tends to lead to a disproportionate amount of aid going to small countries.  
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