American Economic Review: Vol. 90 No. 4 (September 2000)


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Aid, Policies, and Growth

Article Citation

Burnside, Craig, and David Dollar. 2000. "Aid, Policies, and Growth." American Economic Review, 90(4): 847-868.

DOI: 10.1257/aer.90.4.847


This paper uses a new database on foreign aid to examine the relationships among foreign aid, economic policies, and growth per capita GDP. We find that aid has a positive impact on growth in developing countries with good fiscal, monetary, and trade policies but has little effect in the presence of poor policies. Good policies are ones that are themselves important for growth. The quality of policy has only a small impact on the allocation of aid. Our results suggest that aid would be more effective if it were more systematically conditioned on good policy.

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Burnside, Craig (World Bank)
Dollar, David (World Bank)

JEL Classifications

O19: International Linkages to Development; Role of International Organizations
F35: Foreign Aid
O23: Fiscal and Monetary Policy in Development

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