Does aid cause changes in economic freedom?. (16th June 2022)

• Record Type: Journal Article
• Authors: Pavlik, Jamie Bologna; Powell, Benjamin; Young, Andrew T.
• Is Part Of: Southern economic journal. Volume 89:Number 1(2022)
• Page Start: 90
• Page End: 111
• Publication Date: 2022-06-16
• Subjects: economic freedom -- foreign aid -- institutional economics -- matching methods -- political economy; Southern States -- Economic conditions -- Periodicals; Economics -- Periodicals; Economic history; Economics; Southern States; Periodicals; 330.975005
• DOI: 10.1002/soej.12587
• Languages: English
• ISSNs: 0038-4038

Abstract

Abstract: We examine whether aid affects recipient countries' economic freedom. The existing empirical literature examining this relationship has found conflicting results. However, all of these existing studies have struggled to employ plausible identification strategies to find a causal relationship between aid and economic freedom. Our study employs matching methods to better estimate the causal relationship between aid and economic freedom. We find that there is no meaningful causal impact of overall aid on recipient countries' economic freedom. There is some evidence that, specifically, large and sustained increases in "governance‐specific" aid lead to increases in economic freedom, but even then the effects appear to be quantitatively modest.