The effect of foreign aid on economic growth : A cross section study on aid to Sub-Saharan Africa

• Main Author: Sheikh Ahmed, Zahra
• Format: Others
• Language: English
• Published: Södertörns högskola, Institutionen för samhällsvetenskaper 2014
• Subjects: Corruption; Developing countries; Development economics; Economic growth; Foreign aid; Human capital; Investment; Two-gap model; bistånd; ekonomisk tillväxt; human kapital; investering; korruption; two-gap modellen; utvecklingsekonomi; utvecklingsländer
• Online Access: http://urn.kb.se/resolve?urn=urn:nbn:se:sh:diva-25257

For decades the question regarding foreign aid’s effectiveness has been disputed. The ongoing debate concerning whether foreign aid yields or prevents economic growth has been discussed by different scholars, though with dissimilar outcomes. Foreign aid is often criticized for creating destruction rather than stimulating developing countries economic growth, though the fundamentals for aid is to create opportunities for developing countries to evolve and gain better socio-economic structures. Different forms of aid are supposed to create different outcomes, i.e. short- and medium-term aid ought to stimulate the country while long-term aid such as infrastructure and education should create growth for the recipient country. The problem of aid is mostly corruption, corrupted regimes hinders the natural development for aid that is to say it hampers the positive outcome aid can produce. So, does foreign aid have a positive impact on recipient countries growth? The aim of this study is to acknowledge the importance of foreign aid. In order to analyse whether foreign aid results in economic growth for developing countries in Sub-Saharan Africa, a crosssection regression analysis has been conducted. To sum up the results of this study foreign aid doesn’t have a significant effect on economic growth in the region Sub-Saharan Africa although other variables such as education and foreign direct investment has a significant effect on growth.