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.

Type of review
Literature review