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The Effectiveness of Aid to Development. Focus on the Aid-Growth literature.

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par François Defourny
Facultés N-D de la Paix de Namur - Université Catholique de Louvain - Master in International and Development Economics 2005

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5.2. The swinging pendulum of Clemens, Radelet and Bhavnani (2004)

In another exercise to distinguish successive trends in the empirical literature of aid effectiveness, Clemens, Radelet and Bhavnani (2004) focus on the outcomes of the different authors in their quest to define different phases. For them the literature is comparable to a swinging pendulum alternating between optimistic and pessimistic periods. We think this conclusion is a little bit excessive since they tend to drop a number of contradicting regressions in order to provide a more convincing characterisation of a period12. After a first period of dominating optimism, they found a surge of criticism in the early seventies against aid to development13. Immediately after, this revisionist literature has been counter-attacked

9 See for example Easterly (2003, p26)

10 Burnside and Dollar (1997), Hadjimichael et al. (1995), Durbarry et al. (1998), Hansen and Tarp (1999)

11 Boone (1996)

12 For example, the second phase of Clemens, Radelet and Bhavnani (2004) running from 1972 to 1980 is thought to be an optimistic period regarding the aid-growth relation. Nevertheless, the articles of Gupta (1975) and Newlyn (1973) presented very ambivalent results.

13 Griffin (1970), Griffin and Enos (1970)

by Papanek (1972) with his positive correlation between aid and growth. Thereafter, a period of controversy14 lasted until the key paper of the last decade, namely the very pessimistic one of Boone (1996). Since then, the literature can be divided into its sceptic supporters and its opponents arguing that foreign aid has an unconditional positive effect on recipients' growth.

As we can see, these two approaches offer interesting structures to analyse the past literature. However, they sometimes interpret a particular article in a way that suits them best. In other words, they tend to choose the best interpretation of a study in order to remain consistent with the proposed framework. An illustration of this practice is the appreciation of the link between the article of Boone (1996) and the one of Burnside and Dollar (1997). On the one hand, Hansen and Tarp (2000) clearly oppose the pessimistic Boone (1996) and the rather optimistic Burnside and Dollar (1997). On the other hand, Clemens et al. (2004) range Burnside and Dollar (1997) among the studies that «take Boone to be more or less correct».

This leaves us with an ambiguous feeling. Is it impossible to find one single conclusion about the impact of foreign aid on economic growth? Rajan and Subramanian (2005, p5) summarize explicitly our intuition about this empirical literature: «The literature has sometimes followed a cycle in which one paper finds a result, and is followed by another paper with a twist, either overturning or qualifying the previous result, followed by another, and so on. This has had some undesirable effects on policy with advocates selectively using results to bolster their preferred view on aid.» In the next part we will try to reconsider the entire aid-growth literature in a historical perspective.

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