Aid and growth in the Pacific Islands

Pavlov, Vladimir & Sugden, Craig (2006) Aid and growth in the Pacific Islands. Asian-Pacific Economic Literature, 20(2), pp. 38-55.

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The literature on the aid–growth relationship has recently been reinvigorated through the application of growth equations that seek to explain growth as a function of institutions, policies and aid. This approach has generally led to the conclusion that aid has contributed to growth, albeit with decreasing returns. Some studies have found that there is only a positive relationship between aid and growth when there is a favourable policy environment—a finding that has been used to provide a reason for the reallocation of aid to better-performing countries and an increased emphasis by donors on aid conditionality. It is unclear whether these conclusions apply to the Pacific island countries given their unusual features: notably, small populations, remote locations and a high level of aid. This paper draws on the recent literature in examining the aid–growth relationship in seven Pacific island countries. A positive relationship between aid and growth is identified, although it is subject to decreasing returns. The study is unable to provide an adequate explanation for the role of institutions and policy in growth in the countries studied, or determine whether aid only contributes to growth when favourable policy environments are in place.

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ID Code: 8194
Item Type: Journal Article
Refereed: No
Additional Information: For more information, please refer to the journal's website (see hypertext link) or contact the author.
Author contact details:
Keywords: aid–growth relationship, economic performance, Pacific island countries (PICs), aid, Pacific Islands
DOI: 10.1111/j.1467-8411.2006.00182.x
ISSN: 1467-8411
Subjects: Australian and New Zealand Standard Research Classification > ECONOMICS (140000)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 2006 Blackwell Publishing
Deposited On: 22 Jun 2007 00:00
Last Modified: 18 Mar 2015 04:07

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