A Replication of “Counting Chickens When They Hatch†(Economic Journal 2012)

Clemens, Radelet, Bhavnani, and Bazzi (CRBB) argue that the most-cited cross-country studies of the impact of foreign aid can be reconciled if changed in certain ways. The shared finding is then, in the CRBB view, that more aid is followed on average by more growth. I exactly replicate the estimation results of CRBB and then question these results with additional specifications and tests. One CRBB step, restricting the aid variable to assistance most likely to affect growth in the short run, does not make much difference. Two other changes—lagging the aid variables and differencing the data to remove fixed effects—fail to remove contemporaneous endogeneity. Addressing this issue produces evidence of zero or negative Granger causation from aid/(gross domestic product) to growth. And the regressions embodying all of CRBB’s changes do not peg the impact of aid as statistically significant.