Spatial Aid Spillovers During Transition

We investigate whether development aid stimulates growth in transition economies, paying particular attention to the possibility of spatial spillovers arising from aid. We find that aid has a positive impact on growth of the recipient country. However, aid also appears to generate adverse growth spillovers on other nations. In contrast, we find significant positive spatial spillovers from good policies and there is some evidence that growth in one transition economy tends to spillover to bordering countries. Spillovers are an important part of the growth experience of transitional economies.