| Abstract: |
Like many public policy debates, that over whether foreign aid works carries
on in two worlds. Within the research world, it plays out in the form of
papers full of technical language, formulas, and numbers. Outside, the
arguments are plainer and the audience broader, but those academic studies
remain a touchstone. While avoiding jargon, this paper reviews recent,
contending studies of how much foreign aid affects country-level outcomes such
as economic growth and school attendance rates. This particular kind of study
is ambitious: it is far easier to evaluate a school-building project, say, on
whether the school was built and children filled its seats than to determine
whether all aid, or large subcomponents of it, made the economy grow faster.
Because of its ambition, this literature has attracted attention from those
hoping for clear answers on whether aid "works.' On balance, the quantitative
approach to exploring grand questions about aid effectiveness, which began 40
years ago, was worth trying and is probably worth pursuing somewhat further.
But the literature will probably continue to disappoint as often as it offers
hope. Perhaps the biggest challenge is going beyond documenting correlations
to demonstrating causation—not just that aid went hand-in-hand with economic
growth, but caused it. Aid has eradicated diseases, prevented famines, and
done many other good things. But given the limited and noisy data available,
its effects on growth in particular probably cannot be detected. |