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Does Aid Work?

17 August 2005

Does Aid Work?

Noted Otago University economist debates merits of aid to developing world

The recent G8 summit in Scotland highlighted the need for the industrialised world to support economic development in Africa and other areas of the developing world, and yet the question remains: Does aid really work?

David Fielding, Donald Reid Chair in the Department of Economics at the University of Otago’s School of Business, poses this question at his inaugural professorial lecture this Thursday.

“I’m approaching the issue from an economist’s point of view. Why can’t economists work out how foreign aid affects the countries to which it is directed?” says Professor Fielding.

“There are two key problems. One is the identification of the treatment effect. We know poor countries get more aid on average than rich ones. But simply comparing countries with aid to those without does not show the effect of aid.

“Problem two is how development is to be measured,” he continued. “Aid might affect a wide variety of social and economic indicators. But which indicators are important and how do they interact?”

The lecture will draw on recent research carried out by Professor Fielding and colleagues at the United Nations University World Institute for Development Economics Research (WIDER) in Helsinki.

Two main conclusions arise from this research:

Industrialised nations should not stop aid designed to alleviate household poverty. Even with poor political institutions, this sort of aid can be delivered with a reasonable degree of efficiency, as the results of the WIDER study show.

Aid to promote industry or industrial productivity should be given only to countries with strong institutions. At the same time, more work needs to be done to identify ways to promote institutional quality across the developing world.

Does Aid Work? Inaugural Professorial Lecture – Professor David Fielding Castle Lecture Theatre 1, Thursday 18 August at 5.30 pm.


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