This paper makes two main contributions. First, we examine the long-run effect of foreign aid on domestic output for 59 developing countries using heterogeneous panel cointegration techniques to control for omitted variable and endogeneity bias and to detect possible cross-country differences in...

Is aid effective in increasing growth rates of recipient countries? This is the burning question in any economic evaluation of aid effectiveness, yet there is no consensus on the answer. Recent advances in growth theory help us to identify the various mechanisms by which aid can increase growth,...