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Aid–Growth Nexus and Corruption

  • Birendra Narayan Shah , Jinyoung Hwang und Sacit Hadi Akdede EMAIL logo
Veröffentlicht/Copyright: 7. November 2023

Abstract

Using data on 71 aid recipient countries over the period 2000–2019, this study examines the effect of the size and composition of foreign aid (Official Development Assistance, ODA) on economic growth. The size of ODA is positively correlated with growth, and the impact of an increase in ODA on growth decreases when ODA reaches a certain level. The influence of the composition of ODA in terms of grants and loans on growth is estimated differently depending on sample selection. The sample is divided into two sub-samples based on the median of the corruption perception index. The regression results show that grants have a positive and significant impact on growth without sample selection. However, loans have a positive and significant impact on growth in the sub-sample of less corrupt countries, but a negative and significant impact on growth in the sub-sample of more corrupt countries. Therefore, the results suggest that ODA is useful for inducing growth in the early stages of development. However, improvement in the economic environment in terms of reduced corruption is required to increase the positive impact of ODA in the form of loans on growth.


Corresponding author: Sacit Hadi Akdede, Department of Economics, Bakircay Universitesi, Seyrek Mevki Menemen İzmir, Menemen, 35665 Izmir, İzmir, Türkiye, E-mail:

Appendix
Table 5:

Countries in the sample.

Relatively more corrupt countries Relatively less corrupt countries
No. Country CPI No. Country CPI
1 Sudan 16 1 Albania 35
2 Guinea-Bissau 18 2 Brazil 35
3 Haiti 18 3 Cote d’Ivoire 35
4 Cambodia 20 4 Egypt, Arab Rep. 35
5 Nicaragua 22 5 Mongolia 35
6 Madagascar 24 6 North Macedonia 35
7 Cameroon 25 7 Bosnia and Herzegovina 36
8 Tajikistan 25 8 Panama 36
9 Bangladesh 26 9 Peru 36
10 Guatemala 26 10 Thailand 36
11 Honduras 26 11 Colombia 37
12 Mozambique 26 12 Gambia, The 37
13 Nigeria 26 13 Tanzania 37
14 Dominican Republic 28 14 Vietnam 37
15 Kenya 28 15 Ecuador 38
16 Lebanon 28 16 Sri Lanka 38
17 Paraguay 28 17 Turkey 39
18 Uganda 28 18 Burkina Faso 40
19 Guinea 29 19 Indonesia 40
20 Mali 29 20 Benin 41
21 Mexico 29 21 China 41
22 Togo 29 22 Ghana 41
23 Azerbaijan 30 23 India 41
24 Kyrgyz Republic 30 24 Morocco 41
25 Bolivia 31 25 Armenia 42
26 Gabon 31 26 Solomon Islands 42
27 Moldova 32 27 Jamaica 43
28 Niger 32 28 Tunisia 43
29 Pakistan 32 29 South Africa 44
30 Sierra Leone 33 30 Argentina 45
31 El Salvador 34 31 Senegal 45
32 Eswatini 34 32 Jordan 48
33 Nepal 34 33 Mauritius 52
34 Philippines 34 34 Namibia 52
35 Malaysia 53
36 Costa Rica 56
37 Georgia 56
  1. Note: Aid recipient countries are divided into two sub-samples based on the median of Corruption Perception Index (CPI) in 2019.

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Received: 2022-08-12
Accepted: 2023-08-29
Published Online: 2023-11-07
Published in Print: 2023-11-27

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