Does aid work?

This review summarizes recent research on the impacts of foreign aid on economic growth, poverty and other welfare indicators.

It appears to be a robust finding that economic growth increases a few years after an increase in foreign aid. Some authors interpret this as a causal effect, others not. If the full effect has a causal interpretation, the impact of aid is large; aid at the level of 10% of GDP will raise the growth rate by one percentage point.

The estimates for poverty reduction and other welfare indicators are also positive, although with variation between indicators.