Aid and Income: Another Time-series Perspective

TY - JOUR

T1 - Aid and Income

T2 - Another Time-series Perspective

AU - Lof, Matthijs

AU - Mekasha, Tseday Jemaneh

AU - Tarp, Finn

PY - 2015/5/1

Y1 - 2015/5/1

N2 - This study provides a replication of the empirical results reported by Nowak-Lehmann, Dreher, Herzer, Klasen, and Martínez-Zarzoso (2012) (henceforth NDHKM). We uncover that NDHKM relied on a regression model which included a log transformation of variables that are not strictly positive. This led to nonrandom omission of a large proportion of observations. Furthermore, we show that NDHKM’s use of co-integrated regressions is not a suitable empirical strategy for estimating the causal effect of aid on income. Evidence from a Panel VAR model estimated on the dataset of NDHKM, suggests a positive and statistically significant long-run effect of aid on income.

AB - This study provides a replication of the empirical results reported by Nowak-Lehmann, Dreher, Herzer, Klasen, and Martínez-Zarzoso (2012) (henceforth NDHKM). We uncover that NDHKM relied on a regression model which included a log transformation of variables that are not strictly positive. This led to nonrandom omission of a large proportion of observations. Furthermore, we show that NDHKM’s use of co-integrated regressions is not a suitable empirical strategy for estimating the causal effect of aid on income. Evidence from a Panel VAR model estimated on the dataset of NDHKM, suggests a positive and statistically significant long-run effect of aid on income.

U2 - 10.1016/j.worlddev.2013.12.015

DO - 10.1016/j.worlddev.2013.12.015

M3 - Journal article

SN - 0305-750X

VL - 69

SP - 19

EP - 30

JO - World Development

JF - World Development

ER -