Aid and Economic Growth in Ldcs: Evidence from Sub-Saharan Africa

In: The review of black political economy: analyzing policy prescriptions designed to reduce inequalities, Band 20, Heft 3, S. 31-52

Abstract

This paper uses a disaggregated cross-national time-series aid data and a Least Squares Dummy Variables (LSDV) model to investigate the effects of aid on economic growth in Sub-Saharan Africa. We find that, contrary to what some critics of aid argue, aid has a small but positive and significant effect on economic growth in Sub-Saharan Africa. A simultaneous equation specification of the model shows that aid affects economic growth in Sub-Saharan Africa directly and indirectly through increased domestic savings and investment.