Skip to main content

Aid dependence as aid persistence? Non-declining aid and growth

Journal of International Relations and Development volume 21, pages 717–738 (2018)Cite this article

Abstract

Recent literature proliferates with studies examining the ‘curses’ of aid, or ‘aid-dependent’ relationships. This latter term, while widely used, is surprisingly under-developed conceptually and has generally been understood as some nebulous ‘large’ threshold of aid. To conceptualise the term more concretely, this paper draws on the welfare dependence literature to suggest a complementary understanding of aid dependence based on aid persistence, specifically the duration of non-declining aid receipt. The paper finds evidence that this aid dependence is associated with negative macroeconomic performance, suggesting that more useful understandings of aid dependence may be predicated as much on the duration, as the quantity, of aid receipt.

This is a preview of subscription content, access via your institution.

Access options

Buy single article

Instant access to the full article PDF.

USD 39.95

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Figure 1
Figure 2
Figure 3

References

  • Agénor, Pierre-Richard and Joshua Aizenman (2010) ‘Aid Volatility and Poverty Traps’, Journal of Development Economics 91(1): 1–7.

    Article  Google Scholar 

  • Antingi-Ego, Michael (2005) ‘Budget Support, Aid Dependency, and Dutch Disease: The Case of Uganda’, in Stefan Koeberle, Zoran Stavreski and Jan Walliser, eds, Budget Support as More Effective Aid? Recent Experiences and Emerging Lessons, Washington: World Bank, publication no. 35967.

  • Arellano, Christina, Ales Bulir, Timothy Lane and Leslie Lipschitz (2009) ‘The Dynamic Implications of Foreign Aid and its Variability’, Journal of Development Economics 88: 87–102.

    Article  Google Scholar 

  • Awokuse, Titus O (2007) ‘Causality Between Exports, Imports, and Economic Growth: Evidence from Transition Economies’, Economics Letters 94(3): 389–95.

    Article  Google Scholar 

  • Azam, Jean-Paul, Shantayanan Devarajan and Stephen O’Connell (1999) ‘Aid-Dependence Reconsidered’, working paper no. 189, Oxford: Centre for the Study of African Economics.

  • Bandyopadhyay, Subhayu and E. Katarina Vermann (2013) ‘Donor Motives for Foreign Aid’, Federal Reserve Bank of St. Louis Review 95(4): 327–36.

    Google Scholar 

  • Barbier, Edward B (2004) ‘Agricultural Expansion, Resource Booms and Growth in Latin America: Implications for Long-Run Economic Development’, World Development 32(1): 137–57.

    Article  Google Scholar 

  • Besley, Timothy and Torsten Persson (2014) ‘Why do Developing Countries Tax so Little?’, Journal of Economic Perspectives 28(4): 99–120.

    Article  Google Scholar 

  • Boone, Peter (1996) ‘Politics and the Effectiveness of Foreign Aid’, European Economic Review 40(2): 289–329.

    Article  Google Scholar 

  • Brambor, Thomas, William Roberts Clark and Matt Golder (2006) ‘Understanding Interaction Models: Improving Empirical Analyses’, Political Analysis 14(1): 63–82.

    Article  Google Scholar 

  • Brautigam, Deborah and Stephen Knack (2004) ‘Foreign Aid, Institutions, and Governance in Sub–Saharan Africa’, Economic Development and Cultural Change 52(2): 255–85.

    Article  Google Scholar 

  • Brazys, Samuel (2010) ‘Dutch Disease in the Western Pacific: An Overview of the FSM Economy Under the Amended Compact of Free Association’, Pacific Economic Bulletin 25(3): 24–39.

    Google Scholar 

  • Brazys, Samuel (2014) ‘Outside Looking in: Non-Accession to the WTO’, Cambridge Review of International Affairs 27(4): 644–65.

    Article  Google Scholar 

  • Brazys, Samuel (2016) ‘Aid and Governance: Negative Returns?’, European Journal of Development Research 28(2): 294–313.

    Article  Google Scholar 

  • Bruno, Giovanni S. F. (2005) ‘Approximating the Bias of the LSDV Estimator for Dynamic Unbalanced Panel Data Models’, Economics Letters 87(3): 361–66.

    Article  Google Scholar 

  • Bulir, Ales and A. Javier Hamann (2008) ‘Volatility of Development Aid: From the Frying Pan into the Fire?’, World Development 36(10): 2048–66.

    Article  Google Scholar 

  • Burnside, Craig and David Dollar (2000) ‘Aid, Policies and Growth’, American Economic Review 90(4):847–68.

    Article  Google Scholar 

  • Busse, Matthias and Steffen Groning (2009) ‘Does Foreign Aid Improve Governance?’, Economics Letters 104(2): 76–78.

    Article  Google Scholar 

  • Campbell, Ian C. (1992) ‘A Historical Perspective on Aid and Dependency: The Example of Tonga’, Pacific Studies 15(3): 59–75.

    Google Scholar 

  • Cardoso, Fernando Henrique (1977) ‘The Consumption of Dependency Theory in the United States’, Latin American Research Review 12(3): 7–24.

    Google Scholar 

  • Carter, Patrick (2013) ‘Does Foreign Aid Displace Domestic Taxation?’, Journal of Globalization and Development 4(1): 1–47.

    Article  Google Scholar 

  • Carter, D. B. and R. W. Stone (2015) ‘Democracy and Multilateralism: The Case of Vote Buying in the UN General Assembly’, International Organization 69(1): 1–33.

    Article  Google Scholar 

  • Castel-Branco, C. N. (2008) ‘Aid Dependency and Development: A Question of Ownership? A Critical View’, working paper no. 01/2008, Maputo, Mozambique: Instituto de Estudos Sociais e Economicos.

  • Catrinescu, Natalia, Miguel Leon-Ledesma, Matloob Piracha and Bryce Quillin (2009) ‘Remittances, Institutions, and Economic Growth’, World Development 37(1): 81–92.

    Article  Google Scholar 

  • Chow, Gregory C. and Kui‐Wai Li (2002) ‘China’s Economic Growth: 1952–2010’, Economic Development and Cultural Change 51(1): 247–56.

    Article  Google Scholar 

  • Clemens, Michael A., Steven Radelet, Rikhil R. Bhavnani and Samuel Bazzi (2012) ‘Counting Chickens when they Hatch: Timing and the Effects of Aid on Growth’, Economic Journal 122(561): 590–617.

    Article  Google Scholar 

  • Clist, Paul and Oliver Morrissey (2011) ‘Aid and Tax Revenue: Signs of a Positive Effect Since the 1980s’, Journal of International Development 23: 165–280.

    Article  Google Scholar 

  • Collier, Paul (1999) ‘Aid Dependency: A Critique’, Journal of African Economics 8(4): 528–45.

    Article  Google Scholar 

  • Copelovitch, Mark S. and David Ohls (2012) ‘Trade, Institutions, and the Timing of GATT/WTO Accession in Post-Colonial States’, Review of International Organizations 7(1): 81–107.

    Article  Google Scholar 

  • Crocker, Chester (1968) ‘External Military Assistance to Sub–Saharan Africa’, Africa Today 15(2): 15–20.

    Google Scholar 

  • Dalgaard, Carl–Johan, Henrik Hansen and Finn Tarp (2004) ‘On the Empirics of Foreign Aid and Growth’, Economic Journal 114: F191–F216.

    Article  Google Scholar 

  • Djankov, Simeon, Jose Montalvo and Marta Reynal-Querol (2009) ‘Aid with Multiple Personalities’, Journal of Comparative Economics 37(2): 217–29.

    Article  Google Scholar 

  • Doucouliagos, Hristos and Martin Paldam (2008) ‘The Aid Effectiveness Literature: The Sad Results of 40 Years of Research’, Journal of Economic Surveys 23(3): 433–61.

    Article  Google Scholar 

  • Dreher, Axel, Peter Nunnenkamp and Rainer Thiele (2008) ‘Does US Aid Buy UN General Assembly Votes?’, Public Choice 136: 139–64.

    Article  Google Scholar 

  • Dunning, Thad (2004) ‘Conditioning the Effects of Aid: Cold War Politics, Donor Credibility, and Democracy in Africa’, International Organization 58(2): 409–23.

    Article  Google Scholar 

  • Easterly, William (2003) ‘Can Foreign Aid Buy Growth?’, Journal of Economic Perspectives 17(3):23–48.

    Article  Google Scholar 

  • Easterly, William (2007) ‘Was Development Assistance a Mistake?’, American Economic Review 97(2): 328–32.

    Article  Google Scholar 

  • Godfrey, Martin, Chan Sophal, Toshiyasu Kato, Long Vou Piseth, Pon Dorina, Tep Saravy, Tia Savora and So Sovannarith (2002) ‘Technical Assistance and Capacity Development in an Aid-Dependent Economy: The Experience of Cambodia’, World Development 30(3): 355–73.

    Article  Google Scholar 

  • Griffin, Keith (1991) ‘Foreign Aid After the Cold War’, Development and Change 22(4): 645–85.

    Article  Google Scholar 

  • Gupta, Sanjeev, Benedict Clements, Alexander Pivovarsky and Erwin Tiongson (2003) ‘Foreign Aid and Revenue Response: Does the Composition of Aid Matter?’, working paper no. 03/176. Washington: International Monetary Fund.

  • Hailu, Degol and Aadmasu Shiferaw (2012) ‘Macroeconomic Determinants of Exit from Aid-Dependence’, working paper no. 90, Brasilia, DF, Brazil: International Policy Centre for Inclusive Growth.

  • Hansen, Henrik and Finn Tarp (2001) ‘Aid and Growth Regressions’, Journal of Development Economics 64(2): 547–70.

    Article  Google Scholar 

  • Hayter, Teresa (1971) Aid as Imperialism, Harmondsworth: Penguin Books.

    Google Scholar 

  • Jacobellis v. Ohio (1964) 378 U.S. 184. Supreme Court of the United States of America.

  • Keohane, Robert (1967) ‘The Study of Political Influence in the General Assembly’, International Organization 21(2): 221–37.

    Article  Google Scholar 

  • Knack, Stephen (2001) ‘Aid-Dependence and the Quality of Governance: Cross–Country Empirical Tests’, Southern Economic Journal 68(2): 310–29.

    Article  Google Scholar 

  • Lensink, Robert and Howard White (1999) Aid Dependence: Issues and Indicators, Stockholm: Almqvist & Wiksell International.

    Google Scholar 

  • Lensink, Robert and Howard White (2001) ‘Are There Negative Returns to Aid?’, Journal of Development Studies 37(6): 42–65.

    Article  Google Scholar 

  • McKinley, Robert D. and Richard Little (1979) ‘The US Aid Relationship: A Test of the Recipient Need and the Donor Interest Models’, Political Studies 27(2): 236–50.

    Article  Google Scholar 

  • Meernik, James, Eric Krueger and Steven Poe (1998) ‘Testing Models of US Foreign Policy: Foreign Aid During and After the Cold War’, Journal of Politics 60(1): 63–85.

    Article  Google Scholar 

  • Mosley, Paul (1980) ‘Aid, Savings and Growth Revisited’, Oxford Bulletin of Economics and Statistics 42(2): 79–95.

    Article  Google Scholar 

  • Moss, Todd and Arvind Subramanian (2005) ‘After the Big Push? Fiscal and Institutional Implications of Large Aid Increases’, working paper no. 71, Washington: Center for Global Development.

  • Moss, Todd, Gunilla Pettersson and Nicolas van de Walle (2006) ‘An Aid-Institutions Paradox? A Review Essay on Aid Dependency and State Building in Sub-Saharan Africa’, working paper no. 74, Washington: Center for Global Development.

  • Nickell, Stephen (1981) ‘Biases in Dynamic Models with Fixed Effects’, Econometrica: Journal of the Econometric Society 48: 1417–26.

    Article  Google Scholar 

  • Nord, Roger, Michael Mered, Nisha Agrawal and Zafar Ahmed (1993) ‘Structural Adjustment, Economic Performance, and Aid Dependency in Tanzania’, working paper no. WP/93/66, Washington: International Monetary Fund.

  • Rajan, Raghuram and Arvind Subramanian (2008) ‘Aid and Growth: What Does the Cross–Country Evidence Really Show?’, Review of Economics and Statistics 90(4): 643–65.

    Article  Google Scholar 

  • Rajan, Raghuram and Arvind Subramanian (2011) ‘Aid, Dutch Disease, and Manufacturing Growth’, Journal of Development Economics 94: 106–18.

    Article  Google Scholar 

  • Riddell, Roger (1996) ‘Aid Dependency’, in Gus Edgren, Roger Riddell and Rehman Sobhan, eds, Aid Dependency: Causes, Symptoms and Remedies, Project, 2015, 23–110, Stockholm: Swedish International Development Cooperation Agency.

    Google Scholar 

  • Roodman, David (2009) ‘How to do xtabond2: An Introduction to Difference and System GMM in Stata’, Stata Journal 9(1): 86–136.

    Google Scholar 

  • Smith, Ron P. (2014) ‘The Economic Costs of Military Conflict’, Journal of Peace Research 51(2): 245–56.

    Article  Google Scholar 

  • Sobhan, Rehman (1981) ‘Bangladesh and the World Economic System: The Crisis of External Dependence’, Development and Change 12(3): 327–47.

    Article  Google Scholar 

  • Sobhan, Rehman (1996) ‘Aid Dependence and Donor Policy’, in Gus Edgren, Roger Riddell and Rehman Sobhan, eds, Aid Dependency: Causes, Symptoms and Remedies, Project, 2015, 111–245, Stockholm: Swedish International Development Cooperation Agency.

    Google Scholar 

  • Svensson, J. (1999) ‘Aid, Growth and Democracy’, Economics and Politics 11(3): 275–97.

    Article  Google Scholar 

  • Svensson, J. (2000) ‘When is Foreign Aid Policy Credible? Aid Dependence and Conditionality’, Journal of Development Economics 61(1): 61–84.

    Article  Google Scholar 

  • Swedish International Development Authority (SIDA) (1996) Aid Dependency: Causes, Symptoms and Remedies, Project, 2015, Stockholm: Swedish International Development Cooperation Agency.

    Google Scholar 

  • Wang, Te-Yu (1999) ‘US Foreign Aid and UN Voting: An Analysis of Important Issues’, International Studies Quarterly 43(1): 199–210.

    Article  Google Scholar 

  • Younger, Stephen (1992) ‘Aid and the Dutch Disease: Macroeconomic Management when Everybody Loves You’, World Development 20(11): 1587–97.

    Article  Google Scholar 

Download references

Acknowledgements

The author thanks the participants of the International Studies Association 2013 annual conference and the UCD School of Politics and International Relations Seminar Series for comments and suggests on earlier drafts of this manuscript. All errors remain his own.

Author information

Authors and Affiliations

  1. University College Dublin, Dublin, Ireland

    Samuel Brazys

Authors
  1. Samuel Brazys
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Samuel Brazys.

Appendices

Appendix 1: Data

The data for this project were gathered from two sources. Official development assistance was gathered from the OECD creditor reporting system (CRS) database available at http://stats.oecd.org/Index.aspx?DatasetCode=CRSNEW. Gross domestic product, per capita GDP, fixed capital formation, crop yield, battle deaths, and life expectancy were gathered from World Bank’s WDI database available at http://data.worldbank.org/data-catalog/world-development-indicators. All regressions were run in STATA 13. Missing data were dropped from the regression. For a full list of missing data points, or for a full replication dataset, please contact the author.

See Table 4.

Table 4 Summary statistics
Full size table

The data includes any country that received ODA at any period from 1970 to 2005. These countries include (years of complete data missing in parentheses): Afghanistan (1970–2005), Algeria, Angola (1970–1985), Antigua and Barbuda (1970–1980), Argentina, Armenia (1970–1990), Aruba (1970–2005), Azerbaijan (1970–1990), Bahamas (1970–1980), Bahrain (1970–2005), Bangladesh (1970), Barbados, Belarus (1970–2000), Belize (1970–1980), Benin, Bermuda (1970–2005), Bhutan (1970–1985), Bolivia, Botswana, Brazil, Brunei (1970–1985), Burkina Faso, Burundi, Cambodia (1970–1995), Cameroon, Cape Verde (1970–1985), Cayman Islands (1970–2005), Central African Rep., Chad, Chile, Colombia, Comoros (1970–1980), Congo, Dem. Rep., Congo, Rep., Costa Rica, Cote d’Ivoire, Croatia (1970–1990), Cuba (1970), Cyprus (1970–1975), Dominica (1970–1980), Dominican Republic, Ecuador, Egypt, Arab Rep., El Salvador, Equatorial Guinea (1970–2005), Eritrea (1970–1995), Ethiopia (1970–1990), Fiji, French Polynesia (1970–2005), Gabon, Gambia (1970), Ghana, Gibraltar (1970–2005), Grenada (1970–1980), Guatemala, Guinea (1970–1990), Guinea-Bissau (1970), Guyana, Haiti (1970–1995), Honduras, India, Indonesia, Iran, Islamic Rep., Iraq (1970–2005), Israel, Jamaica (1970), Jordan (1970–1975), Kazakhstan (1970–1990), Kenya, Kiribati (1970–2005), Korea, Dem. Rep. (1970–2005), Korea (2005), Kuwait (1970–1995, 2005), Kyrgyz Republi5 (1970–1990), Lao PDR (1970–1985, 1995), Lebanon (1970–1990), Lesotho, Liberia (1970–1995), Libya (1970–2000), Macao (1970–2005), Macedonia, FYR (1970–1990), Madagascar, Malawi, Malaysia, Maldives (1970–1995), Mali (1970), Malta (1970), Marshall Islands (1970–2005), Mauritania, Mauritius (1970–1980), Mayotte (1970–2005), Mexico, Micronesia Fed. Sts. (1970–2005), Moldova (1970–2005), Mongolia (1970–1985), Montenegro (1970–2005), Morocco, Mozambique (1970–1980), Myanmar (1970–2005), Namibia (1970–1985), Nepal, Netherlands Antilles (1970–2005), New Caledonia (1970–1980, 2000–2005), Nicaragua, Niger, Nigeria (1970–2005), Northern Marianas (1970–2005), Oman, Pakistan, Palau (1970–2005), Panama (1970–1975), Papua New Guinea, Paraguay, Peru, Philippines, Qatar (1970–2005), Rwanda, Samoa (1970–2005), Sao Tome & Principe (1970–2005), Saudi Arabia (1970), Senegal, Serbia (1970–1995), Seychelles (1970–2005), Sierra Leone (1970–1975), Singapore (1970–2005), Slovenia (1970–1990), Solomon Islands (1970–1990), Somalia (1970–2005), South Africa (1970–1990), Sri Lanka, St. Kitts-Nevis (1970–2005), St. Lucia (1970–2005), St. Vincent & Grenadines (1970–1975), Sudan (1970–1975), Suriname (1970–1975), Swaziland (1970–1975), Syrian Arab Republic, Tajikistan (1970–1990), Tanzania (1970–1990), Thailand, Timor-Leste (1970–2000), Togo, Tonga (1970–2005), Trinidad and Tobago, Tunisia, Turkey, Turkmenistan (1970–1990), Turks and Caicos Islands (1970–2005), Tuvalu (1970–2005), Uganda (1970–1985), Ukraine (1970–2000), United Arab Emirates (1970–2005), Uruguay, Uzbekistan (1970–1990), Vanuatu (1970–1980), Venezuela, Vietnam (1970–1985), Yemen (1970–1990), Rep., Zambia, Zimbabwe.

See Figures 4 and 5.

Figure 4
figure 4

Histogram of aid dependence year count

Full size image
Figure 5
figure 5

Histogram of GDP per capita change

Full size image

Appendix 2: Robustness checks

See Table 5.

Table 5 Impact of aid dependence on economic growth (fixed effects and pooled with clustered SEs)
Full size table

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Brazys, S. Aid dependence as aid persistence? Non-declining aid and growth. J Int Relat Dev 21, 717–738 (2018). https://doi.org/10.1057/s41268-017-0087-z

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/s41268-017-0087-z

Keywords

  • aid
  • aid curse
  • dependence
  • growth
  • SDGs