Foreign Aid and Market-Liberalizing Reform

By Jac C. Heckelman, Stephen F. Knack. 2005

159 citations recorded by the source corpus.

Market-oriented economic policies-reflected in limited economic activity by government, protection of private property rights, sound monetary policy, outward orientation regarding trade and efficient tax and regulatory policy-have been strongly linked to faster rates of economic growth. Foreign aid is often provided in the belief that it encourages liberalizing reforms in these areas. This paper analyzes the impact of aid on market-liberalizing policy reform, correcting for the possible endogeneity of aid. Results indicate that higher aid slowed reform over the 1980-2000 period, as measured by a broad index of policies. Disaggregating policy into five areas, aid is significantly linked to slower reform in some policy areas but not in others. Disaggregating by decade, aid's adverse impact on policy reform is much more pronounced for the 1980s than for the 1990s.

Subfields: Development, Economics and Econometrics, Information Systems

View Paper: https://www.semanticscholar.org/paper/0fe16edbda52a9e00588408603f5b2fe95664c42

Citations in the corpus

• Does Conditionality Work? A Test for an Innovative US Aid Scheme (2011, unknown): “Dreher and Rupprecht (2007) even find that IMF programs reduce reform efforts; Heckelman and Knack (2008) report the same for overall aid.”
• Reinventing Foreign Aid for Inclusive and Sustainable Development: Kuznets, Piketty and the Great Policy Reversal (2016, unknown): “…the government; the Dutch Disease and poor institutions (Knack, 2001; Remmer, 2004; Boone, 1996; Bräutigam & Knack, 2004; Rajan & Subramanian, 2008; Heckelman & Knack, 2008) and; vested interest, coupled with poor planning and implementation (Easterly, 2002; Gibson et al., 2005; Dollar & Svensson,…”
• The Impact of Political Leaders' Profession and Education on Reforms (2009, unknown): “The selection of covariates follows Heckelman and Knack (2005).”