Chapter 3: The Nature and Content of Aid
AID AND GROWTH In historical terms, ODA represents an opportunity for developing countries to accelerate their climb out of poverty. It is therefore important to assess whether this opportunity has been seized and whether aid has had a positive impact on growth or not. A comparison of the growth rates of per capita income between various developing-country regions over the past 25–30 years indicates that, apart from the East Asia and Pacific region, all other areas have exhibited poor economic performance. Since all these regions have been receiving significant flows of aid for the past four to five decades, there has in recent years been a legitimate concern about the impact of aid on development. Because of its serious policy implications, the question of the impact of aid on growth has been increasingly subject to very vigorous debate. The recent theoretical and empirical literature on growth has, in particular, inspired considerable research to be undertaken on the relationship between ODA and important economic and social variables. From initial anecdotal research, the arguments are now based on more and more complex econometric models which consider large amounts of cross-country data. A large body of evidence is therefore now available on the basis of which it would seem possible to make a more definitive assessment of the impact of aid on development. We shall therefore first summarize the main findings of the studies in this area, and then disaggregate aid into its various components to get a better understanding of the...
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