| Author/Presenter |
Hafiz Akhand (University of Regina) |
| Title |
Aid, Institutions and Development:: Recasting the Role of Foreign Aid |
| Abstract |
Much of the empirical research on aid effectiveness and growth in recent years highlights two seemingly robust empirical phenomena: (a) that foreign aid has not been effective in stimulating growth in the aid recipient countries; and (b) that institutions are vital for economic development and growth. Motivated by these observations, many researchers and policy makers are calling for a recasting of the role of foreign aid. This paper investigates whether foreign aid can help initiate reforms in policies and institutions that are congenial to economic growth and development. The paper demonstrates that a higher level of education and human capital weakens a ruler's ability to block institutional reforms which encourage productive activities. However, the borrowing constraints confronted by citizens at the early stages of their lives limit a nation's ability to accumulate human capital. By relaxing the borrowing constraints, foreign aid can increase a nation's human capital stock, foment institutional reforms, and promote growth and development. Based on the findings reported here, the paper calls for reforming the current aid practices and provides some directions to that end. |
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