Aid Effectiveness in OIC Member Countries: Beyond Economics Indicators
DOI:
https://doi.org/10.31436/ijema.v25i2.488Abstract
This paper examines whether official development assistance (ODA) is an effective tool for human development and progress of recipient OIC (Organization of Islamic Cooperation) member countries. The paper estimates the impact of aid on social indicators rather than on economic growth. It measures the impact of ODA classified by sectors on the components of Human Development Index (HDI): standards of living, life expectancy, and education indices. It controls for the magnitude of civil violence, population growth, foreign direct investment, income, urbanization and regime type; whether a regime is democratic or autocratic. It utilizes annual data between 2002 and 2015 for OIC member countries. Results indicate that ODA is an effective tool for human development, having a greater and a more efficient impact on human development than other development instruments included in the analysis. We also find that civil violence is a powerful deterrent of HDI. Based on these results, the paper suggests increasing ODA, particularly, to health and education sectors, and intensifying efforts to prevent and reduce civil violence as well as monitoring and managing post-conflict states to cope with the risk of relapsing into conflict.References
Alesina, A. and D. Dollar. “Who Gives Foreign Aid to Whom and Why?†Journal of Economic Growth 5, no. 1 (2000): 33-63.
Arndt, C., S. Jones, and F. Tarp. “Assessing Foreign Aid’s Long-Run Contribution to Growth and Development.†World Development 69 (2015): 6-18.
Arellano, Manuel, and S. Bond. “Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations.†Review of Economic Studies 58, (1991): 277-98.
Arellano, Manuel, and Olympia Bover. “Another Look at the Instrumental Variable Estimation of Error-Components Models.†Journal of Econometrics 68, no. 1 (1995): 29-51.
Ayittey, G.B.N., Africa Unchained: The Blueprint for Africa’s Future. London: Palgrave-MacMillan, 2005.
Bearce, D.H., and Tirone, D.C. “Foreign Aid Effectiveness and the Strategic Goals of Donor Governments.†The Journal of Politics 72, no. 3 (2010): 837-51.
Baland, J.M., K.O. Moene, and J.A. Robinson. “Governance and Development.†CRED Working Papers 7 (2010): 1-90.
Blundell, R., and S. Bond. “Initial Conditions and Moment Restrictions in Dynamic Panel Data Models.†Journal of Econometrics 87, no. 1 (1998): 115-43.
Boone, P. “Politics and the Effectiveness of Foreign Aid.†European Economic Review 40, no. 2 (1996): 289-329.
Brown, D.S., and Hunter, W. “Democracy and Social Spending In Latin America, 1980-92.†American Political Science Review 93, no. 4 (1999): 779-90.
Burnside, C., and D. Dollar. “Aid, Policies, and Growth.†American Economic Review 90, no. 4 (2000): 847–68.
Collier, P. “Development and Conflict.†Centre for the Study of African (2004): 1-12.
Collier, P. “On The Economic Consequences of Civil War.†Oxford Economic Papers 51, no. 1 (1999): 168-83.
Collier, P., and D. Dollar. “Aid Allocation and Poverty Reduction.†European Economic Review 46, no. 8 (2002): 1475-500.
Collier, P., and D. Dollar. “Can the World Cut Poverty in Half? How Policy Reform and Effective Aid Can Meet the International Development Goals.†World Development 29, no. 11 (2001): 1787-802.
Diwakar, V. “The Effect of Armed Conflict on Education: Evidence from Iraq.†The Journal of Development Studies 51, no. 12 (2015): 1702-18.
Easterly, W. The Tyranny of Experts: Economists, Dictators, and The Forgotten Rights of the Poor. New York: Basic Books, 2014.
Frankel, J.A., and D. Romer. “Does Trade Cause Growth?†American Economic Review 89, no. 3 (1999): 379-99.
Gomanee, K., S. Girma, and O. Morrissey. “Aid, Public Spending and Human Welfare: Evidence from Quantile Regressions.†Journal of International Development 17, no. 3 (2005): 299-309.
Guillaumont, P., and L. Chauvet. “Aid and Performance: A Reassessment.†Journal of Development Studies 37, no. 6 (2001): 66-87.
Hansen, H., and F. Tarp. “Aid Effectiveness Disputed.†Journal of International Development 12, no. 3 (2000): 375-98.
Hansen, H., and F. Tarp. “Aid and Growth Regressions.†Journal of Development Economics 64, no. 2 (2001): 547-70.
Hassoun, N. “Empirical Evidence and the Case for Foreign Aid.†Public Affairs Quarterly 24, no. 1 (2010): 1-20.
Huang, Yongfu, and M.G. Quibria. “The Global Partnership for Inclusive Growth.†United Nations University – World Institute for Development Economics Research (UNU-WIDER) Working Paper 2013-059 (2013).
Huntington, S.P. Political Order in Changing Societies. New Haven: Yale University Press, 1968.
Ishnazarov, D. “Aid Effectiveness in OIC Member Countries.†Journal of Economic Cooperation and Development 37, no. 4 (2016): 149-76.
Kraay, A., and C. Raddatz. “Poverty traps, aid, and growth.†Journal of Development Economics 82, no. 2 (2007): 315-47.
Kosack, S. “Effective Aid: How Democracy Allows Development Aid to Improve the Quality of Life.†World Development 31, no. 1 (2003): 1-22.
Leon, G. “Civil Conflict and Human Capital Accumulation the Long-Term Effects of Political Violence in Perú.†Journal of Human Resources 47, no. 4 (2012): 991-1022.
Lensink, R., and O. Morrissey. “Aid Instability as a Measure of Uncertainty and the Positive Impact of Aid on Growth.†Journal of Development Studies 36, no. 3 (2000): 31-49.
Levy, Daniel, and Natan Sznaider. "Memory unbound: The Holocaust and the formation of cosmopolitan memory." European Journal of Social Theory 5.1 (2002): 87-106.
Malapit, H.J.L., T.S. Clemente, and C. Yunzal, “Does Violent Conflict Make Chronic Poverty More Likely? The Mindanao Experience.†Philippine Review of Economics 40, no. 2 (2010): 31-58.
Masud, N., and B. Yontcheva. “Does Foreign Aid Reduce Poverty? Empirical Evidence from Nongovernmental and Bilateral Aid.†IMF Working Paper WP/05/100 (2005).
McGillivray, M., and F. Noorbakhsh. “Aid, Conflict and Human Development.†Working Papers, Business School - Economics, University of Glasgow (2007).
McGillivray, M. “Aid Effectiveness and Selectivity: Integrating Multiple Objectives into Aid Allocations.†United Nations University – World Institute for Development Economics Research (UNU-WIDER) Discussion Paper 2003/71 (2003).
McKinley, R. D., and R. Little. “The US Aid Relationship: A Test of the Recipient Need and the Donor Interest Models.†Political Studies 27, no. 2 (1979): 236-50.
Meredith, M. The State of Africa. A History of Fifty Years of Independence. New York: The Free Press, 2006.
Mesquita, B.B., A. Smith, R.M. Siverson, and J.D. Morrow. The Logic of Political Survival. London: The MIT Press, 2003.
Montinola, G.R. “When Does Aid Conditionality Work?†Studies in Comparative International Development 45, no. 3 (2010): 358-82.
Mosley, P., J. Hudson, and S. Horrel. “Aid, the Public Sector and the Market in Less Developed Economies.†The Economic Journal 97, no. 387 (1987): 616-41.
Moyo, D. Dead Aid: Why Aid Makes Things Worse and How There Is Another Way for Africa. London: Penguin Books, 2010.
OECD (2008). “Is It ODA.†Factsheet. http://www.oecd.org/dac/stats/34086975.pdf
Rajan R.G. and A. Subramanian. “Aid and Growth: What Does the Cross-Country Evidence Really Show?†The Review of Economics and Statistics 90, no. 4 (2008): 643-65.
Ram, R. “Recipient Country’s ‘Policies’ and the Effect of Foreign Aid on Economic Growth in Developing Countries: Additional Evidence.†Journal of International Development 16, no. 2 (2004): 201-11.
Sachs, J. The End of Poverty: Economic Possibilities for Our Time. New York: Penguin Press, 2005.
Sachs, J. “Aid Ironies.†Huffington Post, May 24, 2009.
Sachs, J, J.W. McArthur, G. Schimdt-Traub, M. Kruk, C. Bahadur, M. Faye, and G. McCord (2004), “Ending Africa’s Poverty Trap.†Brookings Papers on Economic Activity 1, (2004): 117–240.
Stiglitz, J. Globalization and Its Discontents. New York: W.W. Norton, 2002.
Stiglitz, J., A. Sen, and J.P. Fitoussi. Report by the Commission on the Measurement of Economic Performance and Social Progress. Paris: Commission on the Measurement of Economic Performance and Social Progress, 2010.
Svensson, J. “Aid, Growth and Democracy.†Economics & Politics 11, no. 3 (1999): 275-97.
Tamer, Christina R. “The Effects of Foreign Direct Investment and Official Development Assistance on the Human Development Index in Africa.†Master’s Thesis, University of Massachusetts, 2013.
Toh, Kiertisak, and Prahlad Kasturi. “Rethinking Foreign Aid for Fragile States.†Journal of Economics and Development Studies 2, no. 4 (2014): 31-43.
United Nations Development Programme (UNDP). Human Development Reports, various years.
http://hdr.undp.org/en/content/human-development-index-hdi
United Nations Development Programme (UNDP). Human Development Report 2014: Sustaining Human Progress Reducing Vulnerabilities and Building Resilience Technical Notes:
http://hdr.undp.org/sites/default/files/hdr14_technical_notes.pdf
United Nations Development Programme (UNDP). Human Development Report 2016: Technical notes Calculating the human development indices—graphical presentation
http://hdr.undp.org/sites/default/files/hdr2016_technical_notes.pdf
van de Walle, N. African Economies and the Politics of Permanent Crisis, 1979-1999. Cambridge: Cambridge University Press, 2001.
Wintrobe, R. “The Tinpot and the Totalitarian: An Economic Theory of Dictatorship.†American Political Science Review 84, no. 3 (1990): 849-72.
Arndt, C., S. Jones, and F. Tarp. “Assessing Foreign Aid’s Long-Run Contribution to Growth and Development.†World Development 69 (2015): 6-18.
Arellano, Manuel, and S. Bond. “Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations.†Review of Economic Studies 58, (1991): 277-98.
Arellano, Manuel, and Olympia Bover. “Another Look at the Instrumental Variable Estimation of Error-Components Models.†Journal of Econometrics 68, no. 1 (1995): 29-51.
Ayittey, G.B.N., Africa Unchained: The Blueprint for Africa’s Future. London: Palgrave-MacMillan, 2005.
Bearce, D.H., and Tirone, D.C. “Foreign Aid Effectiveness and the Strategic Goals of Donor Governments.†The Journal of Politics 72, no. 3 (2010): 837-51.
Baland, J.M., K.O. Moene, and J.A. Robinson. “Governance and Development.†CRED Working Papers 7 (2010): 1-90.
Blundell, R., and S. Bond. “Initial Conditions and Moment Restrictions in Dynamic Panel Data Models.†Journal of Econometrics 87, no. 1 (1998): 115-43.
Boone, P. “Politics and the Effectiveness of Foreign Aid.†European Economic Review 40, no. 2 (1996): 289-329.
Brown, D.S., and Hunter, W. “Democracy and Social Spending In Latin America, 1980-92.†American Political Science Review 93, no. 4 (1999): 779-90.
Burnside, C., and D. Dollar. “Aid, Policies, and Growth.†American Economic Review 90, no. 4 (2000): 847–68.
Collier, P. “Development and Conflict.†Centre for the Study of African (2004): 1-12.
Collier, P. “On The Economic Consequences of Civil War.†Oxford Economic Papers 51, no. 1 (1999): 168-83.
Collier, P., and D. Dollar. “Aid Allocation and Poverty Reduction.†European Economic Review 46, no. 8 (2002): 1475-500.
Collier, P., and D. Dollar. “Can the World Cut Poverty in Half? How Policy Reform and Effective Aid Can Meet the International Development Goals.†World Development 29, no. 11 (2001): 1787-802.
Diwakar, V. “The Effect of Armed Conflict on Education: Evidence from Iraq.†The Journal of Development Studies 51, no. 12 (2015): 1702-18.
Easterly, W. The Tyranny of Experts: Economists, Dictators, and The Forgotten Rights of the Poor. New York: Basic Books, 2014.
Frankel, J.A., and D. Romer. “Does Trade Cause Growth?†American Economic Review 89, no. 3 (1999): 379-99.
Gomanee, K., S. Girma, and O. Morrissey. “Aid, Public Spending and Human Welfare: Evidence from Quantile Regressions.†Journal of International Development 17, no. 3 (2005): 299-309.
Guillaumont, P., and L. Chauvet. “Aid and Performance: A Reassessment.†Journal of Development Studies 37, no. 6 (2001): 66-87.
Hansen, H., and F. Tarp. “Aid Effectiveness Disputed.†Journal of International Development 12, no. 3 (2000): 375-98.
Hansen, H., and F. Tarp. “Aid and Growth Regressions.†Journal of Development Economics 64, no. 2 (2001): 547-70.
Hassoun, N. “Empirical Evidence and the Case for Foreign Aid.†Public Affairs Quarterly 24, no. 1 (2010): 1-20.
Huang, Yongfu, and M.G. Quibria. “The Global Partnership for Inclusive Growth.†United Nations University – World Institute for Development Economics Research (UNU-WIDER) Working Paper 2013-059 (2013).
Huntington, S.P. Political Order in Changing Societies. New Haven: Yale University Press, 1968.
Ishnazarov, D. “Aid Effectiveness in OIC Member Countries.†Journal of Economic Cooperation and Development 37, no. 4 (2016): 149-76.
Kraay, A., and C. Raddatz. “Poverty traps, aid, and growth.†Journal of Development Economics 82, no. 2 (2007): 315-47.
Kosack, S. “Effective Aid: How Democracy Allows Development Aid to Improve the Quality of Life.†World Development 31, no. 1 (2003): 1-22.
Leon, G. “Civil Conflict and Human Capital Accumulation the Long-Term Effects of Political Violence in Perú.†Journal of Human Resources 47, no. 4 (2012): 991-1022.
Lensink, R., and O. Morrissey. “Aid Instability as a Measure of Uncertainty and the Positive Impact of Aid on Growth.†Journal of Development Studies 36, no. 3 (2000): 31-49.
Levy, Daniel, and Natan Sznaider. "Memory unbound: The Holocaust and the formation of cosmopolitan memory." European Journal of Social Theory 5.1 (2002): 87-106.
Malapit, H.J.L., T.S. Clemente, and C. Yunzal, “Does Violent Conflict Make Chronic Poverty More Likely? The Mindanao Experience.†Philippine Review of Economics 40, no. 2 (2010): 31-58.
Masud, N., and B. Yontcheva. “Does Foreign Aid Reduce Poverty? Empirical Evidence from Nongovernmental and Bilateral Aid.†IMF Working Paper WP/05/100 (2005).
McGillivray, M., and F. Noorbakhsh. “Aid, Conflict and Human Development.†Working Papers, Business School - Economics, University of Glasgow (2007).
McGillivray, M. “Aid Effectiveness and Selectivity: Integrating Multiple Objectives into Aid Allocations.†United Nations University – World Institute for Development Economics Research (UNU-WIDER) Discussion Paper 2003/71 (2003).
McKinley, R. D., and R. Little. “The US Aid Relationship: A Test of the Recipient Need and the Donor Interest Models.†Political Studies 27, no. 2 (1979): 236-50.
Meredith, M. The State of Africa. A History of Fifty Years of Independence. New York: The Free Press, 2006.
Mesquita, B.B., A. Smith, R.M. Siverson, and J.D. Morrow. The Logic of Political Survival. London: The MIT Press, 2003.
Montinola, G.R. “When Does Aid Conditionality Work?†Studies in Comparative International Development 45, no. 3 (2010): 358-82.
Mosley, P., J. Hudson, and S. Horrel. “Aid, the Public Sector and the Market in Less Developed Economies.†The Economic Journal 97, no. 387 (1987): 616-41.
Moyo, D. Dead Aid: Why Aid Makes Things Worse and How There Is Another Way for Africa. London: Penguin Books, 2010.
OECD (2008). “Is It ODA.†Factsheet. http://www.oecd.org/dac/stats/34086975.pdf
Rajan R.G. and A. Subramanian. “Aid and Growth: What Does the Cross-Country Evidence Really Show?†The Review of Economics and Statistics 90, no. 4 (2008): 643-65.
Ram, R. “Recipient Country’s ‘Policies’ and the Effect of Foreign Aid on Economic Growth in Developing Countries: Additional Evidence.†Journal of International Development 16, no. 2 (2004): 201-11.
Sachs, J. The End of Poverty: Economic Possibilities for Our Time. New York: Penguin Press, 2005.
Sachs, J. “Aid Ironies.†Huffington Post, May 24, 2009.
Sachs, J, J.W. McArthur, G. Schimdt-Traub, M. Kruk, C. Bahadur, M. Faye, and G. McCord (2004), “Ending Africa’s Poverty Trap.†Brookings Papers on Economic Activity 1, (2004): 117–240.
Stiglitz, J. Globalization and Its Discontents. New York: W.W. Norton, 2002.
Stiglitz, J., A. Sen, and J.P. Fitoussi. Report by the Commission on the Measurement of Economic Performance and Social Progress. Paris: Commission on the Measurement of Economic Performance and Social Progress, 2010.
Svensson, J. “Aid, Growth and Democracy.†Economics & Politics 11, no. 3 (1999): 275-97.
Tamer, Christina R. “The Effects of Foreign Direct Investment and Official Development Assistance on the Human Development Index in Africa.†Master’s Thesis, University of Massachusetts, 2013.
Toh, Kiertisak, and Prahlad Kasturi. “Rethinking Foreign Aid for Fragile States.†Journal of Economics and Development Studies 2, no. 4 (2014): 31-43.
United Nations Development Programme (UNDP). Human Development Reports, various years.
http://hdr.undp.org/en/content/human-development-index-hdi
United Nations Development Programme (UNDP). Human Development Report 2014: Sustaining Human Progress Reducing Vulnerabilities and Building Resilience Technical Notes:
http://hdr.undp.org/sites/default/files/hdr14_technical_notes.pdf
United Nations Development Programme (UNDP). Human Development Report 2016: Technical notes Calculating the human development indices—graphical presentation
http://hdr.undp.org/sites/default/files/hdr2016_technical_notes.pdf
van de Walle, N. African Economies and the Politics of Permanent Crisis, 1979-1999. Cambridge: Cambridge University Press, 2001.
Wintrobe, R. “The Tinpot and the Totalitarian: An Economic Theory of Dictatorship.†American Political Science Review 84, no. 3 (1990): 849-72.
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Published
2017-08-31
How to Cite
Ishnazarov, D., & Cevik, N. (2017). Aid Effectiveness in OIC Member Countries: Beyond Economics Indicators. International Journal of Economics, Management and Accounting, 25(2), 315–336. https://doi.org/10.31436/ijema.v25i2.488
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