Foreign aid, poverty reduction, and democracy
- 1 November 2002
- journal article
- research article
- Published by Informa UK Limited in Applied Economics
- Vol. 34 (17), 2151-2156
- https://doi.org/10.1080/00036840210136718
Abstract
Eradication of poverty is the most pervasive goal of donors' foreign aid programmes. As a result, there has been much research on the degree of correlation between aid and poverty reduction. However, this work to date has shed little light on the direction of causation between the two variables. Using the method of Granger causality, and conditioning aid and poverty on the state of democracy in developing countries, this study asks whether aid flows impact poverty, whether poverty influences aid flows, or whether causality proceeds in both directions simultaneously. While the results identify no causal relationships in some of the sub-samples, they point to the existence of a multitude of relationships across others.Keywords
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