The impact of foreign aid on economic development in fragile states

Afonso Roque Ferreira, Ines (2017) The impact of foreign aid on economic development in fragile states. Doctoral thesis, University of East Anglia.

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Abstract

Over the past decade, fragile states has become a resonant term in the development lexicon, frequently employed to draw attention to the need to assist these countries. Among other reasons, external intervention has been justified by their lagging performance in the achievement of development outcomes and the threats they impose to global security and stability.

Still, fragile states impose a dilemma. Although they are in great need of development assistance, aid towards these countries is expected to be less effective. This is the starting point of this thesis, which contributes to the understanding of the effect of foreign aid on economic development in fragile states, using political economy theory and standard econometric techniques.

A review of existing measures of state fragility highlights that most of them lack a strong theoretical grounding, thus confusing causes and outcomes of fragility. This thesis suggests an alternative measurement approach that draws on Besley and Persson’s (2011a) theoretical model, and uses principal component analysis to derive an index for each of the two core dimensions of fragility: state ineffectiveness and political violence. This distinction follows a recent call for using multidimensional approaches and finds support in an exploratory cluster analysis.

This thesis then contributes to the quantitative studies examining the fragility-growth link by replacing the CPIA with the two obtained indices as proxies for fragility and considering the effects of distinct dimensions separately. Using data for the period 19932012, the results from regression analysis show distinct effects for each dimension and find no significant impact of fragility on growth when employing a single index.

Finally, inspired by the empirical aid effectiveness literature, this thesis tests the proposition that aid is less effective in promoting growth in countries with higher levels of state ineffectiveness or political violence. The results show no support for this hypothesis.

Item Type: Thesis (Doctoral)
Faculty \ School: Faculty of Social Sciences > School of International Development
Depositing User: Bruce Beckett
Date Deposited: 23 Jul 2018 15:11
Last Modified: 23 Jul 2018 15:11
URI: https://ueaeprints.uea.ac.uk/id/eprint/67810
DOI:

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