Handbook on the Economics of Foreign Aid
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Handbook on the Economics of Foreign Aid

Edited by B. Mak Arvin and Byron Lew

It would be fair to say that foreign aid today is one of the most important factors in international relations and in the national economy of many countries – as well as one of the most researched fields in economics. Although much has been written on the subject of foreign aid, this book contributes by taking stock of knowledge in the field, with chapters summarizing long-standing debates as well as the latest advances. Several contributions provide new analytical insights or empirical evidence on different aspects of aid. As a whole, the book demonstrate how researchers have dealt with increasingly complex issues over time – both theoretical and empirical – on the allocation, impact, and efficacy of aid, with aid policies placed at the center of the discussion.
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Chapter 25: A case study of aid effectiveness in Bangladesh: development with governance challenges

M.G. Quibria and Anika L. Islam


From a precarious beginning, Bangladesh has achieved notable progress in economic and social development in the past four decades or so. When it became independent in 1971 following a bloody war, there were many skeptics about the country’s long-term economic viability. Some observers predicted a state of perennial aid dependence, while others viewed Bangladesh as a ‘test case of development’ (Faaland and Parkinson, 1976), implying that if the country with its myriad problems and challenges could make development happen, so could any country. Despite this widespread pessimism, Bangladesh has made considerable economic and social strides in the past four decades: it is no longer considered ‘a basket case’. Notwithstanding its large population, the country has achieved a measure of food self-sufficiency (although the food–population balance remains precarious). In the face of low per capita incomes and widespread illiteracy, it has made successful strides toward demographic transition: it reduced its population growth rate from 2.5 percent per year in the 1990s to less than 1.2 percent per year in 2012 (World Bank, 2014). In other social indicators, such as infant mortality, life expectancy, primary school enrollment, female enrollment in school, and adult literacy, Bangladesh has made considerable improvements over the years. With respect to many Millennium Development Goal (MDG) indicators, it now compares favorably with India, even with the latter’s higher per capita income, higher growth rates, and higher social expenditures per capita (Dreze and Sen, 2013).

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