How to order
IMF Publications

Working Papers in full text
2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 All


Other research-related activities and publications of the IMF can be found at IMF Research

Free Email Notification

Receive emails when we post new items of interest to you.

Subscribe or Modify your profile



What Undermines Aid's Impact on Growth?

Author/Editor: Rajan, Raghuram | Subramanian, Arvind
Authorized for Distribution: June 1, 2005
Electronic Access: Free Full Text (PDF file size is 619KB)
Use the free Adobe Acrobat Reader to view this PDF file.
 
Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: We examine one of the most important and intriguing puzzles in economics: why it is so hard to find a robust effect of aid on the long-term growth of poor countries, even those with good policies. We look for a possible offset to the beneficial effects of aid, using a methodology that exploits both cross-country and within-country variation. We find that aid inflows have systematic adverse effects on a country's competitiveness, as reflected in a decline in the share of labor intensive and tradable industries in the manufacturing sector. We find evidence suggesting that these effects stem from the real exchange rate overvaluation caused by aid inflows. By contrast, private-to-private flows like remittances do not seem to create these adverse effects. We offer an explanation why and conclude with a discussion of the policy implications of these findings.
 
Order a print copy
Series: Working Paper No. 05/126
Subject(s): Development assistance | Economic growth | Export competitiveness
Author's keyword(s): Aid | growth | competitiveness
 
English  
    Published:   June 1, 2005        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA2005126   Pages:   54
    Price:   US$15.00 (Academic Rate: US$15.00 )
       
     
Please address any questions about this title to publications@imf.org.