JOURNAL OF APPLIED BUSINESS AND ECONOMICS
Long Run Effects of Foreign Aid on Economic Growth
Author(s): Nicholas Larsen
Citation: Nicholas Larsen, (2020) "Long Run Effects of Foreign Aid on Economic Growth," Journal of Applied Business and Economics, Vol. 22, Iss.13, pp. 184-193
Article Type: Research paper
Publisher: North American Business Press
Abstract:
This paper finds evidence of long run effects on a country’s per capita Gross Domestic Product (GDP) growth using a panel data set of 57 countries that received Official Development Aid (ODA) between 1970 and 2017. The results suggest a statistically significant “multiplier effect” that is sizable. Looking at foreign aid per capita the results suggests that policy makers can achieve a permanent 1% increase in per capita GDP growth by increasing per capita ODA by approximately $110. Similar results are found when using an alternative measure—ODA per Gross National Income—of foreign aid.