AidData Working Paper

Foreign Aid and Growth at the Subnational Level

Date Published

Mar 2, 2017

Authors

Andrea Civelli, Andrew Horowitz, Arilton Teixeira

Publisher

Citation

Civelli, Andrea et al. 2017. Foreign Aid and Growth at the Subnational Level. AidData Working Paper #36. Williamsburg, VA: AidData. Accessed at http://aiddata.org/working-papers.

AidData Working Paper

Foreign Aid and Growth at the Subnational Level

Date Published

Mar 2, 2017

Authors

Andrea Civelli, Andrew Horowitz, Arilton Teixeira

Citation

Civelli, Andrea et al. 2017. Foreign Aid and Growth at the Subnational Level. AidData Working Paper #36. Williamsburg, VA: AidData. Accessed at http://aiddata.org/working-papers.

We develop a measurement strategy for the impact of foreign aid based on a regional panel vectorautoregressive model (P-VAR). We illustrate the strategy using Ugandan districts. Data for the regional units (ADM2) is assembled combining satellite sources for socio-economic activity, geo-located aid disbursements, and traditional household surveys. We find statistically significant positive and persistent effects of aid shocks on nighttime luminosity. Mapping nightlights to economic activity, the results suggest that the economic magnitude of these effects is small, but significant – with a multiplier between 2 and 3 in the medium to long-run. The P-VAR addresses endogeneity concerns associated with non-random aid assignment.