Foreign Aid and Africa:

Does it Increase Economic Growth?

By James Mumma

Countries Badly in need of

aid

Somewhat in need of

aidReceiving lots of Aid Cell 1 Cell 2

Receiving less AidCell 3 Cell 4

Participation in Aid with Regard to Need

Is Aid determined by need?

CountriesBadly in need of

aid

Somewhat in need of

aidReceiving lots of Aid Cell 1 Cell 2

Receiving less AidCell 3 Cell 4

Selection Question?

• Who receives Aid?

In reality aid is determined by much more than need

• Trade openness• Democracy• Civil liberties• Colonial status• Direct foreign investment• Initial income (PPP)• Population

Selection Cases: Uganda, Ghana, Tanzania, Ethiopia

Performance Question?

• What causes aid to in turn lead to increased economic growth?– Measure growth using Per Capita GDP

• Political Status?• Amount of aid received?• “Political will”?• Overall Dependence on Aid?• As % of government expenditure?

• Initial size of GDP per capita?

The End