A panel estimation and case study analysis of aid effectiveness in sub-saharan africa

There is considerable debate on the potential benefits and costs of aid. On the one hand, aid provides much needed resources to improve development efforts and alleviate poverty in developing countries. On the other hand, aid can create dependencies. This paper analyzes the effectiveness of aid for countries in Sub-Saharan Africa (SSA).

Using a sample of eleven countries from SSA including Botswana, Cameroon, Cote d'Ivoire, Ethiopia, Ghana, Kenya, Nigeria, Senegal, South Africa, Tanzania and Togo we estimate a modified version of Barro’s (1991) growth model. Following the literature, we use the Generalized Method of Moments (GMM) estimation for panel data of our sample countries from 1975 to 2006. Furthermore, we hope to show whether aid can contribute to economic growth along with other factors such as trade, Foreign Direct Investment (FDI), education and political stability.

To complement our empirical work, we also analyze specific cases of aid effectiveness within our sample countries. For our case study analysis, we carefully examine the political, social and economic environment of the country as well as the type of aid (for example, budget-support v. project-support) that the country has received. Using our empirical results and case studies, we analyze how aid has helped in some cases and not in others. This paper will add to the literature on aid effectiveness and contribute to the discussion of foreign aid and policy reforms. As a result, this paper aims to shed light on the difference conditions under which aid can be effective and the policy implications.