The global partnership for sustainable development

This paper examines whether foreign aid, together with other economic, social and environmental factors, contributes to sustainable development. It starts with a theoretical model where sustainable development is modelled as a different kind of growth that protects the environment. Using factor analysis and newly developed estimation methods for a dynamic panel data model with endogenous regressors, the empirical section finds evidence that foreign aid has been a significantly positive influence on sustainable development in aid recipient countries. This effect is very likely to go through channels related to growth and resources as well as a technology channel with respect to energy intensity. This research has important implications for a post-2015 development framework on international collective action with regard to a sustainable future.