The impact of foreign aid on the human development index: a cross-regional study of Asia, Latin America, and Africa
Date
2009-11
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Abstract
The paper aims to measure and compare the effectiveness of foreign aid on development in Asia, Latin America and Africa as measured by the Human Development Index. The study investigates if aid is really doing its job in improving the welfare of developing countries in terms of its people's income, health and education which are all captured in the Human Development Index. Also, it tries to provide an answer to the debate between the aid optimists and pessimists if aid is beneficial or not.
In order to do this, 20 countries from Asia, 10 from Latin America, and 33 from Africa were selected among the medium and low human development countries as classified by the United Nations Development Programme in its Human Development Report. The author then conducted a panel data regression for each region.
The results of the regression analysis showed varied results for the 3 regions. Specifically, the effect of aid on HDI was found to be positive in Latin America and Africa. However, the effect of aid was insignificant for Asia. Therefore, it can be said that there is no one conclusive answer to whether aid is effective or not. The effectiveness of foreign aid is different across regions and will most likely be dependent on donor and recipient characteristics.
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Keywords
Human development, Foreign aid, Development assistance, Public health