Foreign Aid and Human Welfare: A Quantile Regression Approach

  • Masoud Rashid Mohamed Zanzibar University
  • Said Seif Mzee Zanzibar University

Abstract

This paper investigates the impact of foreign aid on human development as measured by the human development index (HDI). We apply quantile regression approach for the data from 124 developing countries covering the period 1980 to 2013. The findings show that in general, aid is positively associated with the human development index. The impact is much greater in countries with low level of human development. Similarly, we find statistically positive impact of aid on HDI income, health, and education indices. The results imply that since aid is positively related with HDI, and HDI is universally accepted as a quantitative measure of human development, then aid can significantly contribute to promoting human welfare.

References

Bahmani-Oskooee, M., and M. Oyolola. “Poverty Reduction and Aid: Cross-Country Evidence. International Journal of Sociology and Social Policy 29, no. 5 (2009): 264-73.

Baltagi, B.H. “Pooling Cross-Sections with Unequal Time-Series Lengths.” Economics Letters 18 (1985): 133-6.

Baltagi, B.H., and Y. Chang. “Incomplete Panels: A Comparative Study of Alternative Estimators for the Unbalanced One Way Error Component Regression Model.” Journal of Econometrics 62, no. 2 (1994): 67-89.

Boone, P. (1996). “Politics and the Effectiveness of Foreign Aid.” European Economic Review 40, no. 2 (1996): 289-329.

Buchinsky, M. “Recent Advances in Quantile Regression Models: A Practical Guideline for Empirical Research.” Journal of Human Resources 33 (1998): 88-126.

Burke, P.J., and F.Z. Ahmadi-Esfahani. “Aid and Growth: A Study of South East Asia.” Journal of Asian Economics 17, no. 2 (2006): 350-62.

Burnside, C., and D. Dollar. “Aid, Policies and Growth.” American Economic Review 90, no. 4 (2000): 847–68.

Dollar, D., and A. Kraay. “Growth is Good for the Poor.” Journal of Economic Growth 7 (2002): 195-225.

Duncan, R.C. “Papua New Guinea: Poverty Analysis, Poverty Reduction and the Appropriateness of AusAID’s Development Assistance.” National Centre for Development Studies, Australian National University, 2001.

Feeny, S. “The Impact of Foreign Aid on Poverty and Human Well-Being in Papua New Guinea.” Asia-Pacific Development Journal 10, no. 2 (2003): 73-86.

Fuller, W.A., and G.E. Battese. “Estimation of Linear Models with Cross-Error Structure.” Journal of Econometrics 2 (1974): 67-78.

Gallup, J.K., D. Sachs, and A. Mellinger. “Geography and Economic Development.” International Regional Science Review 22, no. 2 (1999): 179-232.

Gomanee, K., S. Girma, and O. Morrissey. “Aid and Growth in Sub-Saharan Africa: Accounting for Transmission Mechanisms.” Journal of International Development 17, no. 8 (2005): 1055-75.

Gomanee, K., O. Morrissey, P. Mosley, and A. Verschoor. “Aid, Government Expenditure, and Aggregate Welfare.” World Development 33, no. 3 (2005): 355-70.

Hamid, Zarinah, and Ruzita Mohd Amin. “Trade and Human Development in OIC Countries: A Panel Data Analysis.” Islamic Economics Studies 21, no. 2 (2013): 55-70.

Hasan, Zubair. “Determinants of Human Resource Development: An Empirical Analysis.” IIUM Journal of Economics and Management 8, no. 2 (2000): 157-87.

Kalwij A., and A. Verschoor. “Aid, Social Policy and Pro-Poor Growth.” Occasional Paper 4, Research Programme on Risk, Labour Markets and Pro-Poor Growth, Department of Economics, University of Sheffield, 2002.

Koenker, R., and G. Bassett, Jr. “Regression Quantiles.” Econometrica, 46 (1978): 33-50.

Koenker, R, and K.F. Hallock. “Quantile Regression.” Journal of Economic Perspective 15, no. 4 (2001): 143-56.

Koenker, R. Quantile Regression. Cambridge, UK: Cambridge University Press, 2005.

Kraay, A. “When is Growth Pro-Poor? Evidence from a Panel of Countries.” Journal of Development Economics 80, no. 1 (June 2004): 198-227.

Le, T.H., and P. Winters. “Aid Policies and Poverty Alleviation: The Case of Vietnam.” Asia-Pacific Development Journal 8, no. 2 (2001): 27-44.

Mosley, P., and J. Hudson. Aid, Poverty Reduction and the New Conditionality. OECD International Development Statistics CD Rom, Paris, 2001.

Mosley, P., J. Hudson, and A. Verschoor. “Aid, Poverty Reduction and the New Conditionality.” The Economic Journal 114, no. 496 (2004): 217-43.

Moster, I., and T. Ichida. “Economic Growth and Poverty Reduction in Sub-Saharan Africa.” IMF Working Paper WP/01/112 (2001), International Monetary Fund.

Papanek, G. “Aid, Private Foreign Investment, Savings and Growth in Less Developed Countries.” Journal of Political Economy 81 (1973): 120-30.

Ravallion, M., and C. Shaohua. “What Can New Survey Data Tell Us About Recent Changes in Distribution and Poverty?” The World Bank Economic Review 11, no. 2 (1997): 357-82.

Shirazi, Nasim Shah, Turkhan Ali Abdul Mannap, and Muhammad Ali. “Effectiveness of Foreign Aid and Human Development.” The Pakistan Development Review 48, no. 4 (2009): 853-62.

Wansbeek, T.J., and A. Kapteyn. “Estimation of the Error Components Model with Incomplete Panels.” Journal of Econometrics 41 (1989): 341-61.

Williamson, Claudia R. “Foreign Aid and Human Development: The Impact of Foreign Aid to the Health Sector.” Southern Economic Journal 75, no. 1 (2008): 188-207.
Published
2017-05-31
How to Cite
Mohamed, M. R., & Mzee, S. S. (2017). Foreign Aid and Human Welfare: A Quantile Regression Approach. International Journal of Economics, Management and Accounting, 25(1), 27-41. Retrieved from https://journals.iium.edu.my/enmjournal/index.php/enmj/article/view/369
Section
Articles