Aid and sectoral growth: Evidence from panel data

TY - JOUR

T1 - Aid and sectoral growth

T2 - Evidence from panel data

AU - Selaya, Pablo

AU - Thiele, Rainer

PY - 2010/11

Y1 - 2010/11

N2 - This article examines empirically the proposition that aid to poor countries is detrimental for external competitiveness, giving rise to Dutch disease type effects. At the aggregate level, aid is found to have a positive effect on growth. A sectoral decomposition shows that the effect is (i) significant and positive in the tradable and the nontradable sectors, and (ii) equally strong in both sectors. The article thus provides no empirical support for the hypothesis that aid reduces external competitiveness in developing countries. A possible reason for this finding is the existence of large idle labour capacity that prevents the real exchange rate from appreciating.

AB - This article examines empirically the proposition that aid to poor countries is detrimental for external competitiveness, giving rise to Dutch disease type effects. At the aggregate level, aid is found to have a positive effect on growth. A sectoral decomposition shows that the effect is (i) significant and positive in the tradable and the nontradable sectors, and (ii) equally strong in both sectors. The article thus provides no empirical support for the hypothesis that aid reduces external competitiveness in developing countries. A possible reason for this finding is the existence of large idle labour capacity that prevents the real exchange rate from appreciating.

U2 - 10.1080/00220388.2010.492856

DO - 10.1080/00220388.2010.492856

M3 - Journal article

SN - 0022-0388

VL - 46

SP - 1749

EP - 1766

JO - Journal of Development Studies

JF - Journal of Development Studies

IS - 10

ER -