This paper provides a critical analysis of the growth regressions in Burnside and Dollar (2000). First, we analyze the relation between aid and government expenditure in a modified neoclassical growth model. We find that while good policies spur growth they may at the same time lead to...

This paper takes a fresh look at three issues in the aid effectiveness debate. First, we assess the theoretical case for foreign aid. Using an endogenous growth version of the standard overlapping generations model, we show that aid can be an effective policy tool in spurring growth in poor...

There is a widespread perception among academic researchers and aid practitioners alike that empirical cross-country analysis fails to find any significant link between aid flows and growth, and that aid is successful only when associated with good policies in the recipient countries. These...

We investigate the marginal productivity of investment across countries. The aim is to estimate the return on investments financed by foreign aid and by domestic resource mobilization, using aggregate data. Both returns are expected to vary across countries and time. Consequently we develop a...