Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 3: Can Aid Generate Growth in Africa?

Arne Bigsten
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Arne Bigsten: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Department of Economics., School of Economics and Commercial Law, Göteborg University, Box 640, SE 40530 GÖTEBORG

Abstract: The paper discusses the impact of foreign aid on economic growth in Africa. After brief discussion about growth determinants it goes on to review the available evidence about the impact of aid on African economic growth. Evidence from both cross-country regressions and country studies is considered, and issues relating to economic policy, governance, ownership, and sustainability are identified as particularly important. Given those insights, some general conclusions are drawn as to what type of aid should be given. However, the main focus is on a discussion about how to structure the aid relationship so that it encourages good governance, which is deemed essential for long-term growth. Donors should delegate more responsibility to the recipients, while at the same time creating an incentive structure for good performance. This would include among other things a shift towards ex post conditionality and aid allocation according to performance. Given the improvements in the economic policy environment in Africa, the prospects for effective aid look more promising than they have for a long time.

Keywords: Aid; Growth; Africa

JEL-codes: O19

23 pages, May 15, 1998

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