Economic Growth and the Role of Foreign Aid in Selected African Countries

This article revisits the question of aid effectiveness on economic growth by introducing a country’s legal origin in the debate. We provide compelling evidence to show that both quantity and quality of aid disbursed to Africa’s least developed countries matter and that these effects differ based on a country’s legal origin. A quadratic specification of the total aid variable and source-based proxies are used to capture the effects of quantity and quality of aid, respectively. The aid effects are evaluated in a dynamic framework using system GMM. Our results are robust to different model specifications and estimation techniques.