Revisiting the nexus between development aid, institutions, and growth: A global evidence

Abstract

Objective: This study mainly focuses on the relationship between development aid and growth as well as examines the role of the institutional development levels of countries in this relationship and makes economic inferences. Methods: The analysis is conducted for 64 countries receiving official development assistance in the 2000–2020 period. To provide robust estimates in these studies, the Driscoll and Kraay estimator is used after fixed and random effects models. Results: In almost all of the estimated models, a significant relationship between official development assistance per capita and growth is found. Moreover, the models with institutional factors and interaction terms also support the results. According to the robust estimation results, official development assistance per capita positively affects growth. Conclusion: The results for all countries do not mean that good policies and strong institutions are unnecessary. In contrast, they show that the priority is the sum of aid per capita.