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Article Review
Morrissey, O. (2001). Does aid increase growth? Progress in Development Studies, 1, 37-50. doi:
10.1177/146499340100100104

The World Bank, in 1998, made a statement which said that aid, also called official
development assistance, can only be effective in countries with a good policy environment. The
article, Does aid increase growth? by Oliver Morrissey tries to reevaluate this statement from
the World Bank by reviewing recent empirical evidence on the relationship of aid and growth.
This article is intended for a wide audience, but most especially to governments of
developed countries, since this article is expected to verify if aid is really effective. Since
developed countries are the donors of aid, this article may help these countries decide whether to
continue giving out aid or not.
A background on quantitative economics is required to fully understand the ideas
presented in this empirical article, since it uses results from regressions in presenting the
evidence on the impact of aid on growth.
The World Banks statement on aid ineffectiveness has discouraged some donor
countries from giving aid. Using empirical evidence from various studies done on the
relationship of aid and growth, Morrissey concludes that aid indeed is effective, regardless of
whether the recipient country has good macroeconomic policies in place or not.
The article, however, mentioned that in Africa, aid does not seem to be very effective, but
poor policies cannot be blamed for this alone. There is still the issue of economic uncertainty,
and other factors, which makes aid less effective in African countries. The author then suggested
that if this economic uncertainty can be controlled, then aid can be more effective.
This article contradicts the original view of the World Bank on aid effectiveness. It states
that aid can indeed be more effective in countries with good economic policies; however it does
not necessarily say that aid cannot be effective in countries with poor economic policies.
Camille May Savillo BS Economics III March 25, 2013
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The findings in this article can encourage policy makers to try to improve policies for
countries receiving aid, so as to make aid more effective. Since the article assures the
effectiveness of aid, it will also encourage donor countries to keep on giving aid to less
developed countries.
Growth models such as the Harrod-Domar and neoclassical growth models were
presented in the article, to help explain as to how aid can be able to contribute to the growth of a
developing country. In the Harrod-Domar growth model, Gross Domestic Product (GDP)
increases as investment increases. In the article, it said that aid is effective if it increases
economic growth, through increases in investment. The difference of this model from the
neoclassical growth model is that the latter adds human capital to the factors of production, thus
giving way for aid to have long run effects on growth.
The article was brief, and presented its findings straight to the point. Presentation of data
was clear, since important points were divided into different sections with subtitles to guide the
reader on what the next section will be about. Empirical results were also presented in an
organized manner, though there was lack of explanation on some of the variables presented. The
title was quite appropriate, since the main problem being answered in the article was if aid is
indeed effective in increasing economic growth.
The article however did not answer some important questions, like on how aid and policy
interact. There is evidence that aid can influence policy, however, it could be the other way
around, that policy can influence aid. There is no evidence to support this view, though.
Another issue is how the effect of aid can be properly measured. In the paper, what is
being measured is the effect of aid on growth. Aid can only have an effect on growth if it is
being used for investment. The problem here is that not all aid is intended for investment. Some
forms of aid are specifically for poverty alleviation. This may not impact the growth of a nation
right away, but it might still be effective in reducing poverty in a country. If not all aid is used
for investment, then it may be more difficult to really evaluate if aid has been effective or not.
After reading the article, a lot of questions and insights seemed to nag the back of my
mind. The first point of concern is on the World Banks statement. It seems that they only think
that ineffectiveness of aid can only be blamed on recipient countries. It is not fair to just put all
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the blame or to assume that the reason why aid can become ineffective is because of faults in the
recipient country or government. Can donors also be blamed for aid ineffectiveness?
According to Goldin, et al. (n.d.), donors also make mistakes which may hamper
development for recipient countries. For example, this happens when donor countries give aid
especially to projects or programs which are not very suitable for the recipient country, or when
they support reforms which were too often formulaic, ignoring the central need for country
specificity in the design.
For aid to be effective, both donor and recipient countries should work together. Even if
the article concludes that aid is indeed effective even in weak policy environments, this does not
mean that recipient countries should just let the donors do the work and wait for aid. Ruiters
(2008), suggests that recipient countries should focus on trying to achieve good governance,
effective policies, and conflict resolutions while on the other hand, donor countries should
continue to give and even increase the amounts of aid they give to the developing world.
Through the cooperation of both donor and recipient countries, economic development can be
achieved in a faster manner.
The article did provide evidence that aid is effective, with or without good economic
policies, but it did not mention about the extent of its effectiveness. What if aid only adds to the
economic development of a country by a little percent only? Even if it does help, it does so only
by a little amount, and it may seem that the costs of giving aid will be more than the benefits the
recipient country will receive. So is there any possible way to measure the extent of effectiveness
of aid? We cannot just measure this through investments alone, since it was clarified that aid can
be given in other forms too.
There is also the issue of aid dependency. Some donor countries might become too
dependent on aid. Instead of finding own ways of trying to develop the economy, they may just
rely on receiving aid.
There are many issues on aid that were not answered in Morrisseys article. However,
this does not mean that the article was lacking in information. It was just that the scope of the
article was only to evaluate the relationship of aid and growth, so I did not really expect the
article to answer the questions above.
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The issue on aid is still ongoing, since there are still many developing countries which
need the help of the developed ones. Morrissey believes that aid is effective, but what we are not
sure of is whether aid is worth it. Yes, donor countries are rich enough to give away some of
their resources, but is it really worth it? Are the recipients indeed making use of these resources
in such a way that it is efficient? Instead of giving away resources to these recipient countries,
donor countries can use the money to further develop their own economy. What makes them so
sure that these resources are better off given away to the developing world? The question if aid
increases growth has already been answered. It is now time to answer the next one: is aid worth
the cost?















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Bibliography
Goldin, I., Rogers, H., & Stern, N. (n.d.). The role and effectiveness of development assistance:
Lessons from world bank experience. Retrieved from
http://www.bvsde.paho.org/bvsacd/milenio/desarrollobm.pdf
Ruiters, M. (2008). Official development assistance and the war against poverty. Retrieved from
http://www.idasa.org/media/uploads/outputs/files/Global%20Insight%2081.pdf