Thursday, July 19, 2007

Foreign Aid

The Washington Post reports:

Economists see aid to poor nations as ineffective

Aid to poor countries has little effect on economic growth, and policies that rely on such claims should be reexamined, two former International Monetary Fund economists wrote in a paper released this month.

"We find little evidence of a robust positive correlation between aid and growth," wrote Raghuram Rajan, who stepped down as IMF chief economist at the end of 2006, and Arvind Subramanian, who left the IMF this year, said.

"We find little evidence that aid works better in better policy or institutional environments, or that certain kinds of aid work better than others," they added.

Rajan is now teaching at the University of Chicago, while Subramanian joined theWashington-based Peterson Institute for International Economics.

"Our findings suggest that for aid to be effective in the future, the aid apparatus will have to be rethought."