The Anarchy of Numbers: Aid, Development, and Cross-country Empirics - Working Paper 32

July 11, 2005

*REVISED Version May 2007

Recent literature contains many stories of how foreign aid affects economic growth: aid raises growth in countries with good policies, or in countries with difficult economic environments, or mainly outside the tropics, or on average with diminishing returns. The diversity of these results suggests that many are fragile. I test 7 important aid-growth papers for robustness. The 14 tests are minimally arbi-trary, deriving mainly from differences among the studies themselves. This approach investigates the importance of potentially arbitrary specification choices while minimizing arbitrariness in testing choices. All of the results appear fragile, especially to sample expansion.

The final verison of this paper differs from the previous version (July 2004) in two major respects. It no longer attempts to correct specification problems such as autocorrelation, focusing purely on the issue of fragility. And it now tests GMM regressions for robustness to outlier removal, by picking outliers from parallel 2SLS regressions. These changes in method explain the changes in results since the previous version.

The data used in this Working Paper is available in Excel (data set) and Stata formats (4-year and 5-year aggregates). Full results are available in Excel format (results).

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