International Journal of Business Ethics in Developing Economies

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

A Review of the Legitimacy of Foreign Aid in Contributing to Economic Prosperity


Affiliations
1 Lecturer, Department of Business Administration, University of Liberal Arts Bangladesh, Bangladesh
2 Senior Lecturer, Department of Business Administration, University of Liberal Arts Bangladesh, Bangladesh
     

   Subscribe/Renew Journal


Foreign aid, the altruistic act of sovereign fund transfer, is thought to be a panacea for economic prosperity, along with a myriad of other socio-economic benefits, in developing and underdeveloped economies. The historical narrative of foreign aid as an indispensable tool for economic development is not without criticisms, as its contribution towards poverty alleviation, economic growth, and income inequality reduction is often questioned. In addition, intricate interactions of various factors - conditionality, institutional failure, and corruption - have made measurements of foreign aid effectiveness even more complex. Conditionality restricts aid effectiveness, while widespread corruption and institutional failure escalate the existing problem of income inequality. This seemingly insurmountable conduct has proven to be a daunting challenge, as developing countries struggle to unfasten themselves from the insidious grip of corruption and institutional failure, which is a painfully pervasive dispiriting reality. This study focuses on the historical narrative of the concept of foreign aid provision and attempts to present a synthesis of the contemporary literature on the numerous socio-economic variables that disorient foreign aid’s efficacy.

Keywords

Foreign Aid, Institutional Failure, Income Inequality, Conditionality, Corruption
Subscription Login to verify subscription
User
Notifications
Font Size


  • Addison, T., & McGillivray, M. (2004). Aid to conflict-affected countries: Lessons for donors. Conflict, Security & Development, 4(3), 347-367.

  • Alesina, A., & Weder, B. (2002). Do corrupt governments receive less foreign aid? American Economic Review, 92(4), 1126-1137.

  • Alvi, E., & Senbeta, A. (2014). Foreign aid, growth, and poverty relation: A quantile regression approach. The Journal of Developing Areas, 24(8), 381-403.

  • Bahmani-Oskooee, M., & Oyolola, M. (2009). Poverty reduction and aid: Cross-country evidence. International Journal of Sociology and Social Policy, 29(5/6), 264-273.

  • Bauer, P. T. (1976). Dissent on development. Harvard University Press.

  • Bauer, P., & Yamey, B. (1982). Foreign aid: What is at stake?The Third World, 53-69.

  • Bauer, P., & Yamey, B. (1989). Against foreign aid. Economic Notes, (23). Retrieved from http://www.libertarian.co.uk/ lapubs/econn/econn023.pdf

  • Boone, P. (1996). Politics and the effectiveness of foreign aid. European Economic Review, 40(2), 289-329.

  • Bourguignon, F., & Sundberg, M. (2007). Aid effectiveness opening the black box. American Economic Review, 97(2), 316-321.

  • Burnside, C., & Dollar, D. (2000). Aid, policies, and growth. American Economic Review, 90(4), 847-868.

  • Chong, A., & Gradstein, M. (2008). What determines foreign aid? The donors’ perspective. Journal of Development Economics, 87(1), 1-13.

  • Chong, A., Gradstein, M., & Calderon, C. (2009). Can foreign aid reduce income inequality and poverty? Public Choice, 140(1-2), 59-84.

  • Collier, P., & Dollar, D. (2004). Development effectiveness: What have we learnt? The Economic Journal, 114(496), F244-F271.

  • Connors, J. (2012). Foreign aid and global poverty. Department of Economics Wake Forest University Working Paper No. 17.

  • Crawford, G. (1997). Foreign aid and political conditionality: Issues of effectiveness and consistency. Democratization, 4(3), 69-108.

  • De Long, J. B., & Eichengreen, B. (1991). The Marshall plan: History’s most successful structural adjustment program (No. w3899). National Bureau of Economic Research.

  • Deaton, A. (2013). The great escape: health, wealth, and the origins of inequality. Princeton University Press.

  • Drazen, A. (2004). Political economy in macroeconomics. Princeton, NJ: Princeton University.

  • Easterly, W. (2000). The effect of IMF and World Bank programs on poverty. Retrieved from SSRN 256883.

  • Easterly, W. (2003). Can foreign aid buy growth? Journal of Economic Perspectives, 17(3), 23-48.

  • Eichengreen, B. (2001). The market and the Marshall plan. In The Marshall plan: Fifty years after (pp. 131-145). New York: Palgrave Macmillan.

  • Folke, S., & Nielsen, H. (2006). Introduction: Aid relations, aid impact and poverty reduction. In Aid impact and poverty reduction (pp. 1-27). New York: Palgrave Macmillan.

  • Ghosh, B., & De, P. (2005). Investigating the linkage between infrastructure and regional development in India: Era of planning to globalisation. Journal of Asian Economics, 15(6), 1023-1050.

  • Gottschalk, P., & Smeeding, T. M. (2000). Empirical evidence on income inequality in industrialized countries. Handbook of Income Distribution, 1, 261-307.

  • Gupta, S., Davoodi, H., & Alonso-Terme, R. (2002). Does corruption affect income inequality and poverty? Economics of Governance, 3(1), 23-45.

  • Keeley, B. (2012). From aid to development: The global fight against poverty. OECD Insights. OECD Publishing, Paris. Retrieved from https://doi.org/10.1787/9789264123571-en

  • Khuhro, T. N., Bhutto, N. A., Butt, F., Naz, M., Shah, W.A., & Zarqa, S. (2012, March). Impact of foreign aid on income inequality. In The 2nd International Conference on Business Management, University of Management and Technology, Lahore, March (pp. 28-29).

  • Layton, T. (2008). The effects of foreign aid on income inequality. Sigma: Journal of Political and International Studies, 26(1), 4.

  • Layton, T., & Fuller, J. (2008). Aiding inequality: A pooled time-series analysis of the effect of foreign aid on income inequality. Mimeo, Brigham Young University

  • Macdonald, R., & Hoddinott, J. (2004). Determinants of Canadian bilateral aid allocations: humanitarian, commercial or political? Canadian Journal of Economics/ Revue Canadienne D’économique, 37(2), 294-312.

  • McArthur, J. W., & Sachs, J. D. (2001). Institutions and geography: Comment on Acemoglu, Johnson and Robinson (2000) (No. w8114). National Bureau of Economic Research.

  • Moyo, D. (2009). Dead aid: Why aid is not working and how there is a better way for Africa. Macmillan.

  • Polak, J. J., Roy, J., & Pattillo, M. C. A. (2007). Measuring the effect of foreign aid on growth and poverty reduction or the pitfalls of interaction variables (No. 7-145).International Monetary Fund.

  • Rajan, R. G., & Subramanian, A. (2008). Aid and growth:What does the cross-country evidence really show? The Review of Economics and Statistics, 90(4), 643-665.

  • Raychaudhuri, A., & De, P. (2016). Trade, infrastructure and income inequality in selected Asian countries: An empirical analysis. In International trade and international finance (pp. 257-278). New Delhi: Springer.

  • Reuveny, R., & Li, Q. (2003). Economic openness, democracy, and income inequality: An empirical analysis. Comparative Political Studies, 36(5), 575-601.

  • Rose-Ackerman, S., & Palifka, B. J. (2016). Corruption and government: Causes, consequences, and reform. Cambridge University Press.

  • Senese, P. D. (1999). Democracy and maturity: Deciphering conditional effects on levels of dispute intensity. International Studies Quarterly, 43(3), 483-502.

  • Sumner, A., & Mallett, R. (2012). The future of foreign aid: Development cooperation and the new geography of global poverty. Springer.

  • Wei, S. J. (1997). Why is corruption so much more taxing than tax? Arbitrariness kills (No. w6255). National bureau of economic research.

  • World Bank. (1994). World development report 1994: Infrastructure for development: Executive summary. World Bank.

  • worldpublicopinion.org. (2010). American public vastly overestimates amount of US foreign aid. Retrieved from http://worldpublicopinion.net/american-public-vastlyoverestimates-amount-of-u-s-foreign-aid/

  • Younas, J. (2008). Motivation for bilateral aid allocation: Altruism or trade benefits. European Journal of Political Economy, 24(3), 661-674.


Abstract Views: 141

PDF Views: 0




  • A Review of the Legitimacy of Foreign Aid in Contributing to Economic Prosperity

Abstract Views: 141  |  PDF Views: 0

Authors

M. Adnan Kabir
Lecturer, Department of Business Administration, University of Liberal Arts Bangladesh, Bangladesh
Liliping
Senior Lecturer, Department of Business Administration, University of Liberal Arts Bangladesh, Bangladesh

Abstract


Foreign aid, the altruistic act of sovereign fund transfer, is thought to be a panacea for economic prosperity, along with a myriad of other socio-economic benefits, in developing and underdeveloped economies. The historical narrative of foreign aid as an indispensable tool for economic development is not without criticisms, as its contribution towards poverty alleviation, economic growth, and income inequality reduction is often questioned. In addition, intricate interactions of various factors - conditionality, institutional failure, and corruption - have made measurements of foreign aid effectiveness even more complex. Conditionality restricts aid effectiveness, while widespread corruption and institutional failure escalate the existing problem of income inequality. This seemingly insurmountable conduct has proven to be a daunting challenge, as developing countries struggle to unfasten themselves from the insidious grip of corruption and institutional failure, which is a painfully pervasive dispiriting reality. This study focuses on the historical narrative of the concept of foreign aid provision and attempts to present a synthesis of the contemporary literature on the numerous socio-economic variables that disorient foreign aid’s efficacy.

Keywords


Foreign Aid, Institutional Failure, Income Inequality, Conditionality, Corruption

References