Open AccessDoes Foreign Aid Contribute to HDI Improvement?
Author(s) -
Jordan Signor,
Julien Vandernoot
Publication year - 2021
Publication title -
advances in management and applied economics
Language(s) - English
Resource type - Journals
ISSN - 1792-7544
DOI - 10.47260/amae/1122
Subject(s) - welfare , poverty , human development index , developing country , aid effectiveness , economics , preference , development economics , public economics , economic growth , business , international economics , human development (humanity) , market economy , microeconomics
Foreign aid is aimed at creating a favourable environment capable to fostereconomic growth and development in poorer countries. Accordingly, recipientcountries might rely to a certain extent on external aid to attaint higher welfarelevels. In principle, donour’s aid-allocation preference, aided country policies, itsinstitutional background, and economic environment are decisive in the aideffectiveness. Should not the previous conditions be met, could the country fall intothe poverty trap. Contrary to a large strand of the literature measuring the roleexternal funding has with regards to its contribution to welfare and growth, we showthat Human Development Index is positively driven by internal factors, whilstforeign aid, and private funding have no significant effect. This is coherent with amore recent strand of the literature, suggesting that on average, aid is ineffective inrecipient countries.JEL classification numbers: F35, H20, H83, O1.Keywords: Foreign Aid, HDI improvement, Developing Countries.