The micro-macro paradox has been revived. Despite broadly positive evaluations at the micro and meso-levels, recent literature doubts the ability of foreign aid to foster economic growth and development. This paper assesses the aid-growth literature and, taking inspiration from the program evaluation literature, we re-examine key hypotheses. In our findings, aid has a positive and statistically significant causal effect on growth over the long run, with confidence intervals conforming to levels suggested by growth theory. Aid remains a key tool for enhancing the development prospects of poor countries.
Arndt, C.; Jones, S.; Tarp, F. Aid, Growth, and Development: Have We Come Full Circle? UNU-WIDER, Helsinki, Finland (2010) 36 pp. ISBN 978-92-9230-33-334-1 [WIDER Working Paper No. 2010/96]