The authors wish to thank Glenn Ames, Kwan Choi, Jack Houston, and an anonymous referee for their helpful comments.
Development Aid to Agriculture and Economic Growth
Article first published online: 16 APR 2012
© 2012 Blackwell Publishing Ltd
Review of Development Economics
Volume 16, Issue 2, pages 230–242, May 2012
How to Cite
Kaya, O., Kaya, I. and Gunter, L. (2012), Development Aid to Agriculture and Economic Growth. Review of Development Economics, 16: 230–242. doi: 10.1111/j.1467-9361.2012.00658.x
- Issue published online: 16 APR 2012
- Article first published online: 16 APR 2012
The link between foreign aid and economic growth has been a controversial issue with no strong consensus so far. This paper argues that a possible reason why some studies may conclude that aid is ineffective in promoting economic growth might be that not all aid is given for development purposes (i.e. aid given for strategic considerations, humanitarian reasons or emergency relief). This study classifies foreign aid into four subcategories: agricultural aid, social infrastructure aid, investment aid, and non-investment aid. Using the generalized method of moments (GMM) estimation technique on a Barro type growth regression with panel data from the aid recipient economies, this paper finds that when aid is directed to the agricultural sector of the developing countries, it is positively and significantly related to growth and can affect economic growth in the short run.