scholarly journals Caveat Emptor: Foreign Aid and Entrepreneurship

Economies ◽  
2020 ◽  
Vol 8 (1) ◽  
pp. 4 ◽  
Author(s):  
Tomi Ovaska ◽  
Ryo Takashima
Keyword(s):  
Foreign Aid ◽  
Institutional Quality ◽  
Development Aid ◽  
Economic Outcomes ◽  
Caveat Emptor ◽  
Development Partner

In the last 60 years, the results of development aid have been mixed. Thus far, it has been mostly the aid recipient countries, which have been held responsible for aid’s shortcomings. That focus is misplaced, however, since the donor countries, through development aid, also export some of their own institutions and values to the recipient countries affecting the recipients’ rate of entrepreneurship and income. This study demonstrates how donor countries vary widely in both the type and quality of their institutions and values, leading to diverging economic outcomes. The results indicate that recipient countries should pay serious attention to who their development partner is. In particular, recipients would want to avoid aid from low institutional quality donors with perceived anti-market attitudes. Finally, it is argued that development aid might become more efficient if it moved away from the bilateral, towards the multilateral, mode.

Can foreign aid motivate institutional reform? An evaluation of the HIPC Initiative

2017 ◽  
Vol 6 (2) ◽  
pp. 242-258 ◽  
Author(s):  
Minh Tam Schlosky ◽  
Andrew Young
Keyword(s):  
Foreign Aid ◽  
Developing Economies ◽  
Poor Country ◽  
Civil Liberties ◽  
Institutional Reform ◽  
Institutional Quality ◽  
Entrepreneurial Activity ◽  
Content Type ◽  
Hipc Initiative

Purpose A number of political economy concerns are associated with the provision of foreign aid to developing economies. These concerns suggest that foreign aid is likely to have harmful effects on a recipient’s institutional quality, and that attempts to give aid conditional on policy and institutional reforms are unlikely to succeed. Established in 1996, the Heavily Indebted Poor Country (HIPC) Initiative is a comprehensive, structured attempt to provide multilateral foreign aid conditional on reforms in recipient countries. The purpose of this paper is to evaluate its effectiveness at affecting institutional reform in participating countries. Design/methodology/approach The authors document how participating countries fared in terms of the quality of their policies and institutions. The authors employ the Fraser Institute’s Economic Freedom of the World index as a measure of economic institutions, and the Freedom House political rights (PR) and civil liberties indices as measures of PR and protections. Based on these measures, the authors report unconditional statistics (e.g. average changes) and also regressions of changes in the measures on HIPC Initiative aid allocations and other controls. Findings The authors find that most participating countries experienced either meager increases or outright decreases in institutional quality. The regression results provide no evidence that the Initiative affects meaningful reforms. Originality/value The potential for foreign aid to have deleterious effects on the institutional quality of recipient countries has been of increasing concern to students of economic development. Such effects can have important implications for entrepreneurial activity in these countries. The HIPC Initiative is specifically designed to acknowledge and, indeed, overcome these concerns, leading to actual increases in institutional quality of recipient countries. To the authors’ knowledge, this work is the first to assess whether the promise of the HIPC Initiative is being fulfilled.

DOES FOREIGN AID HELP OR HINDER THE INSTITUTIONAL QUALITY OF THE RECIPIENT COUNTRY? NEW EVIDENCE FROM THE OIC COUNTRIES

2019 ◽  
pp. 1-30
Author(s):  
MOHAMMAD ASHRAFUL FERDOUS CHOWDHURY ◽  
MOHAMED ARIFF ◽  
MANSUR MASIH ◽  
IZLIN ISMAIL
Keyword(s):  
Quantile Regression ◽  
Foreign Aid ◽  
Negative Impact ◽  
Recipient Country ◽  
Institutional Quality ◽  
Institutional Development ◽  
Average Period ◽  
The Impact ◽  
New Evidence

This study examines the impact of foreign aid on the institutional quality (IQ) of the OIC countries. Using the data of OIC countries for the three-year average period from 1991 to 2016, the system GMM finds that aid in general deteriorates the IQ for the aid recipient countries. However, quantile regression suggests that the negative impact of foreign aid on institutional quality (IQ) is relatively greater in the countries where the existing quality of institution is poor. The findings of the study suggest that improving the existing capacity is essential for reaping the optimum benefit of foreign aid on institutional development.

Foreign Aid Procurement Policies of Development Partners in Africa: The Case of Ghana

2017 ◽  
Vol 61 (3) ◽  
pp. 373-391 ◽  
Author(s):  
Fred Borson
Keyword(s):  
Foreign Aid ◽  
Development Aid ◽  
Development Projects ◽  
Policy Space ◽  
African Countries ◽  
Development Partner ◽  
Major Development ◽  
Development Goals

AbstractMajor development projects in many African countries are often financed by development partners through development aid procurement. Development partners implement specific procurement policies aimed at promoting development in countries receiving aid. This article examines the policies of development partners applicable to aid funded procurement. It argues that some development partner policies could limit the policy space available to implement prioritized development goals domestically.

scholarly journals Foreign aid and economic growth in Nigeria: The role of institutional quality

2021 ◽  
Vol 39 (3) ◽  
Author(s):  
Adewale Samuel Hassan
Keyword(s):  
Economic Growth ◽  
Foreign Aid ◽  
Institutional Quality ◽  
Moderating Effect ◽  
Institutional Framework ◽  
Quality Of Institutions ◽  
Positive Effect

This study examined the moderating effect of institutional quality on the foreign aid-economic growth nexus in Nigeria from 1984 to 2018 through the use of Johansen and canonical cointegration regression. Findings from the study indicate that while foreign aid has a separate positive effect on economic growth, the quality of institutions in the country diminishes and leaks out this positive effect. To this end, fiscal authorities in Nigeria need to review the existing institutional framework guiding the sourcing, disbursement and utilization of foreign aid with a view to detecting any loopholes and lapses that encourage diversion of fund and institutionalized corruption which prevent it from promoting growth.

Foreign Aid, External Debt and Economic Growth Nexus in Low-Income Countries: The Role of Institutional Quality

2012 ◽  
Vol 51 (4II) ◽  
pp. 97-116 ◽  
Author(s):  
Unbreen Qayyum ◽  
Adnan Haider
Keyword(s):  
Economic Growth ◽  
Foreign Aid ◽  
Low Income ◽  
Economic Performance ◽  
Foreign Capital ◽  
Good Governance ◽  
External Debt ◽  
Institutional Quality ◽  
Low Income Countries

Foreign capital and institutional quality simultaneously play an important role in the development process of low-income countries. By and large developing nations fell short of funds necessary to spur the economic growth. Along with this constraint, they are facing the down fall in the quality of governance. Low earned revenues and high government expenditure increase the reliance upon the foreign capital mostly in the form of foreign aid and external debt. Just the availability of foreign funds is not sufficient to stimulate the economic growth, there is a need of good governance along with better quality of institutions that will act as a catalyst and improves the efficiency of capital, [see for instance, Agnor and Montiel (2010)]. Good governance establishes impartial, predictable and consistently enforced rules in the form of institutions and thus crucial for the sustained growth [North (1990 and 1992)]. Those countries which have good institutions show positive growth rates whenever the stock of capital increases but the countries with bad institutions, increase in capital investment may lead to negative growth rates due to rent seeking and other unproductive activities, Hall, et al. (2010). In this context, North (1992) argues that the institutions as well as the ideology shape economic performance. While taking into account the technology used, institutions affect economic performance by determining the cost of transaction and production. Formal rules, informal constraints and characteristics of enforcing those constraints together formulate the institutions. Institutions affect economic performance and the differential in performance of economies is basically influenced by the way institutions evolve. The neoclassical economic theory is of little help in investigating the sources beneath economic performance because institutions are taken for granted in their models Agnor and Montiel (2010).

Do Foreign Aid Projects Attract Transnational Terrorism?

2018 ◽  
Vol 24 (4) ◽  
Author(s):  
Andrew Boutton ◽  
Henry Pascoe
Keyword(s):  
Foreign Aid ◽  
Humanitarian Assistance ◽  
Aid Workers ◽  
Transnational Terrorism ◽  
News Stories ◽  
Terrorist Groups ◽  
Local Residents ◽  
The Government ◽  
Project Level

AbstractGovernments and NGOs establish aid projects in order to improve the quality of life for local residents around the world. While recent news stories about aid workers being kidnapped or killed by terrorist groups are alarming, they mask a broader question: Are aid projects effective in promoting humanitarian aims and pacifying the areas to which it is sent? Or, conversely, does their presence actually attract more violence? Although humanitarian assistance is ostensibly non-political, aid projects themselves may make popular targets for terrorist groups. In addition to increasing resources available to plunder, aid provides an appealing foreign target, allowing terrorist groups to reach wider audiences with their attacks and to reinforce the narrative that the government lacks capacity to protect and provide for civilians. In this paper we combine subnational, project-level aid data with newly-assembled subnational data on transnational terrorism to explore terrorist targeting of aid locations. After presenting our matched-sample analysis of terrorist targeting of aid, we outline avenues for future inquiry using high-resolution, subnational data to investigate the strategic vulnerabilities of foreign aid projects.

scholarly journals The Interconnectedness between Institutional Quality, Civil War and Institutional Reform: A Case Study of Nepalese Maoist Civil War

2021 ◽  
Vol 11 (3) ◽  
pp. 59-70
Author(s):  
Saroj Kumar Aryal
Keyword(s):  
Civil War ◽  
Political Development ◽  
Institutional Reform ◽  
Institutional Quality ◽  
Primary Objective ◽  
Institutional Reforms ◽  
Secondary Sources ◽  
Made In

Various factors trigger civil war, depending on the society and stages of political development. But analyzing it through the quality of an institution or some provisions of institutions may lead to a possible cause of a civil war. Thus, the primary objective of this article is to investigate institutional quality and its role in triggering a civil war. This paper argues that there is interconnectedness between institutional quality, civil war, and institutional reforms, which occurs as a series of events. Although the article provides many examples, in the second section, the case study of Nepalese decade-long civil war and post-civil war institutional reform has been presented to back the argument made in the paper. By discussing various dynamics of historical institutionalism, the paper mainly analyzes the primary and secondary sources.

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