What is the Aggregate Economic Rate of Return to Foreign Aid?
Does foreign aid promote aggregate economic growth? In contrast to widespread perceptions, academic studies of this question have been rapidly converging towards a positive answer. We employ a simulation approach to (i) validate the coherence of recent empirics and (ii) calculate plausible ranges for the rate of return to aid. Our results highlight the long-run nature of aid investments and indicate the return to aid falls in ranges commonly accepted for public investments. We find no basis for the view that aid has a pernicious effect on productivity.
Arndt, C.; Jones, S.; Tarp, F. What is the Aggregate Economic Rate of Return to Foreign Aid? UNU-WIDER, Helsinki, Finland (2014) 29 pp. ISBN 978-92-9230-810-0 [WIDER Working Paper No. 2014/089]