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Applying the generalized propensity score matching, we estimate the effect of international aid on country GDP growth based on a panel data of 73 aid recipient countries for the period 1960-2011. The matching permits us to select a set of country-year observations that to the largest extent resemble each other, thus substantially reducing the bias caused by cross-country heterogeneity. Another advantage of this analysis is that we provide the effect of aid over a continuous range of aid-receiving intensities, rather than estimating a single average effect. The does-response function appears to be a more precise description of the effectiveness of aid on development when there exists a nonlinear relationship between the two. We find a slightly concave increasing response of economic growth to international aid intensity. The optimal ratio of aid to country GDP is found to be about 6 percent, which corresponds to a 2 percent increment in country GDP growth rate.

Keywords: popensity score matching ; aid effectiveness

Subject(s): International Development

Issue Date: 2014-05

Publication Type: Journal Article

PURL Identifier: http://purl.umn.edu/169804

Record appears in: Agricultural and Applied Economics Association (AAEA) > 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota





Autor: Liu, Jing ; Florax, Raymond

Fuente: http://ageconsearch.umn.edu/record/169804?ln=en







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