Aid dependence as aid persistence? Non-declining aid and growth

Abstract

Recent literature proliferates with studies examining the ‘curses’ of aid, or ‘aid-dependent’ relationships. This latter term, while widely used, is surprisingly under-developed conceptually and has generally been understood as some nebulous ‘large’ threshold of aid. To conceptualise the term more concretely, this paper draws on the welfare dependence literature to suggest a complementary understanding of aid dependence based on aid persistence, specifically the duration of non-declining aid receipt. The paper finds evidence that this aid dependence is associated with negative macroeconomic performance, suggesting that more useful understandings of aid dependence may be predicated as much on the duration, as the quantity, of aid receipt.

Appendices

Appendix 1: Data

The data for this project were gathered from two sources. Official development assistance was gathered from the OECD creditor reporting system (CRS) database available at http://stats.oecd.org/Index.aspx?DatasetCode=CRSNEW. Gross domestic product, per capita GDP, fixed capital formation, crop yield, battle deaths, and life expectancy were gathered from World Bank’s WDI database available at http://data.worldbank.org/data-catalog/world-development-indicators. All regressions were run in STATA 13. Missing data were dropped from the regression. For a full list of missing data points, or for a full replication dataset, please contact the author.

See Table 4.

Table 4 Summary statistics

The data includes any country that received ODA at any period from 1970 to 2005. These countries include (years of complete data missing in parentheses): Afghanistan (1970–2005), Algeria, Angola (1970–1985), Antigua and Barbuda (1970–1980), Argentina, Armenia (1970–1990), Aruba (1970–2005), Azerbaijan (1970–1990), Bahamas (1970–1980), Bahrain (1970–2005), Bangladesh (1970), Barbados, Belarus (1970–2000), Belize (1970–1980), Benin, Bermuda (1970–2005), Bhutan (1970–1985), Bolivia, Botswana, Brazil, Brunei (1970–1985), Burkina Faso, Burundi, Cambodia (1970–1995), Cameroon, Cape Verde (1970–1985), Cayman Islands (1970–2005), Central African Rep., Chad, Chile, Colombia, Comoros (1970–1980), Congo, Dem. Rep., Congo, Rep., Costa Rica, Cote d’Ivoire, Croatia (1970–1990), Cuba (1970), Cyprus (1970–1975), Dominica (1970–1980), Dominican Republic, Ecuador, Egypt, Arab Rep., El Salvador, Equatorial Guinea (1970–2005), Eritrea (1970–1995), Ethiopia (1970–1990), Fiji, French Polynesia (1970–2005), Gabon, Gambia (1970), Ghana, Gibraltar (1970–2005), Grenada (1970–1980), Guatemala, Guinea (1970–1990), Guinea-Bissau (1970), Guyana, Haiti (1970–1995), Honduras, India, Indonesia, Iran, Islamic Rep., Iraq (1970–2005), Israel, Jamaica (1970), Jordan (1970–1975), Kazakhstan (1970–1990), Kenya, Kiribati (1970–2005), Korea, Dem. Rep. (1970–2005), Korea (2005), Kuwait (1970–1995, 2005), Kyrgyz Republi5 (1970–1990), Lao PDR (1970–1985, 1995), Lebanon (1970–1990), Lesotho, Liberia (1970–1995), Libya (1970–2000), Macao (1970–2005), Macedonia, FYR (1970–1990), Madagascar, Malawi, Malaysia, Maldives (1970–1995), Mali (1970), Malta (1970), Marshall Islands (1970–2005), Mauritania, Mauritius (1970–1980), Mayotte (1970–2005), Mexico, Micronesia Fed. Sts. (1970–2005), Moldova (1970–2005), Mongolia (1970–1985), Montenegro (1970–2005), Morocco, Mozambique (1970–1980), Myanmar (1970–2005), Namibia (1970–1985), Nepal, Netherlands Antilles (1970–2005), New Caledonia (1970–1980, 2000–2005), Nicaragua, Niger, Nigeria (1970–2005), Northern Marianas (1970–2005), Oman, Pakistan, Palau (1970–2005), Panama (1970–1975), Papua New Guinea, Paraguay, Peru, Philippines, Qatar (1970–2005), Rwanda, Samoa (1970–2005), Sao Tome & Principe (1970–2005), Saudi Arabia (1970), Senegal, Serbia (1970–1995), Seychelles (1970–2005), Sierra Leone (1970–1975), Singapore (1970–2005), Slovenia (1970–1990), Solomon Islands (1970–1990), Somalia (1970–2005), South Africa (1970–1990), Sri Lanka, St. Kitts-Nevis (1970–2005), St. Lucia (1970–2005), St. Vincent & Grenadines (1970–1975), Sudan (1970–1975), Suriname (1970–1975), Swaziland (1970–1975), Syrian Arab Republic, Tajikistan (1970–1990), Tanzania (1970–1990), Thailand, Timor-Leste (1970–2000), Togo, Tonga (1970–2005), Trinidad and Tobago, Tunisia, Turkey, Turkmenistan (1970–1990), Turks and Caicos Islands (1970–2005), Tuvalu (1970–2005), Uganda (1970–1985), Ukraine (1970–2000), United Arab Emirates (1970–2005), Uruguay, Uzbekistan (1970–1990), Vanuatu (1970–1980), Venezuela, Vietnam (1970–1985), Yemen (1970–1990), Rep., Zambia, Zimbabwe.

See Figures 4 and 5.

Figure 4

Histogram of aid dependence year count

Figure 5

Histogram of GDP per capita change

Appendix 2: Robustness checks

See Table 5.

Table 5 Impact of aid dependence on economic growth (fixed effects and pooled with clustered SEs)