Aid and local growth in Malawi

Khomba, D. C. and Trew, A. (2022) Aid and local growth in Malawi. Journal of Development Studies, 58(8), pp. 1478-1500. (doi: 10.1080/00220388.2022.2032668)

Abstract

We study the local impact of foreign aid allocated to districts and constituencies in Malawi over the period 1999–2013 using a highly detailed new aid database that includes annual disbursements at each project location. First, we show using household panel surveys that growth in light density is a good proxy for growth in per capita consumption. Second, we introduce a new dataset that permits a novel instrumental variables strategy. We find a consistent and quantitatively significant relationship between aid and growth. Constituency-level regressions point to a larger effect than at district level, suggesting that aid is associated with some relocation of activity across space but not enough to make the net effect zero. The effect on growth is at its highest immediately after its disbursement, and falls to close to zero in subsequent years, implying that foreign aid has a level effect on incomes but does not stimulate sustained growth. Aid delivered as a grant is positively related with growth, while that given as a loan is not.

• Item Type: Articles
• Additional Information: Khomba thanks the University of St. Andrews for PhD funding through a 600th Year Celebration Scholarship.
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Trew, Professor Alex
• Authors: Khomba, D. C., and Trew, A.
• College/School: College of Social Sciences > Adam Smith Business School > Economics
• Journal Name: Journal of Development Studies
• Publisher: Taylor & Francis
• ISSN: 0022-0388
• ISSN (Online): 1743-9140
• Published Online: 20 March 2022
• Copyright Holders: Copyright © 2022 The Authors
• First Published: First published in Journal of Development Studies 58(8): 1478-1500
• Publisher Policy: Reproduced under a Creative Commons licence