Business and Economic Horizons

  Previous Article | Back to Volume | Next Article
  Abstract | References | Citation | Download | Preview | Statistics
Volume 15
Issue 1
Title Can aid stimulate productivity in sub-Saharan Africa? A dynamic panel approach
Author Katarzyna Swierczynska, Agata Kliber
The aim of the study was to examine the impact of the official development aid (ODA) on productivity in Sub-Saharan Africa. As development policies embrace different types of aid interventions, we decomposed aid by type of flows and analysed their relations with 24 African states’ productivity (measured by total factor productivity) over the period 1995-2014. Results of the dynamic panel model estimation reveal important implications for the development cooperation policy agenda. It appears that although total value of ODA does not support productivity, technical aid disbursements are associated with higher total factor productivity. This implies that the implementation of technical cooperation enables absorption of technology and contributes to the increase of technology development in recipient Sub-Saharan African countries. The results are fairly robust. Moreover, in this study we confirm that low infrastructure development and shortages in primary education are associated with lower productivity, while trade openness, development of financial market, and political stability - with higher productivity values.
Abegaz, B. (2005). Multilateral development aid for Africa. Economic Systems, 29(4), 433-454.

Acemoglu, D., Johnson, S., Robinson, J. (2001). The colonial origins of comparative development: An empirical investigation. American Economy Review, 91(5), 1369-1401.

Aghion, P. H. (1992). A model of growth through creative destruction. Econometrica, 60(1), 323-51.

Alvi, E., Senbeta, A. (2012). Foreign aid: good for investment, bad for productivity. Oxford Development Studies, 40(2), 139-161.

Andrzejczak, K., Kliber, A. (2015), The model of French development assistance: who gets the help? Dynamic Econometric Models, 15, 89-109. 

Anoruo, E., Elike, U. (2015). Human capital-economic growth nexus in Africa: heterogeneous panel causality approach. International Journal of Economics and Financial Issues, 5(4), 1017-1023.

Anyanwu, J. C. (2014). Factors affecting economic growth in Africa: are there any lessons from China? African Development Review, 26(3), 468-493.

Arellano, M., Bond, S. (1991). Some tests of specifiction for panel data: Monte Carlo evidence and an application to employment equations. Revue of Economic Studies, 58, 277-297.

Ascari, G., Di Cosmo, V. (2005). Determinants of total factor productivity in the Italian regions, Scienze Regionali/Italian Journal of Regional Science, 2, 27-49.

Baltagi, B. H., Kao, C. (2001). Nonstationary panels, cointegration in panels and dynamic panels: A survey. In: Baltagi, B.H., Fomby, T.B., Hill, C. (Eds.) Nonstationary panels, panel cointegration and dynamic panels. Bingley: Emerald Insight.

Barro, R., Sala-i-Martin, X. (2004). Economic growth (2nd ed.), Cambridge: MIT Press.

Beck, N., Katz, J. (1995). What to do (and not to do) with time-series cross-section data in comparative politics. American Political Science Review, 89(3), 634-647.

Berglof, E. (2015). New structural economics meets European transition. Journal of Economic Policy Reform, 18(2), 114-130.

Birdsall, N., Rodrik, D., Subramanian, A. (2005). How to help poor countries. Foreign Affairs, 84(4), 136-152.

Blundel, R., Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115-143.

Boone, P. (1996). Politics and the effectiveness of foreign aid. European Economic Review, 40, 289-329.

Breusch, T. S. (1978). Testing for autocorrelation in dynamic linear models. Australian Economic Papers, 17(31), 334-355.

Breusch, T. S., Pagan, A. R. (1980). The Lagrange multiplier test and its applications to model specification in econometrics. Revue of Economic Studies, 47(1), 239-253.

Brunel, S. (1993). Le gaspillage de l’aide publique. Paris: Editions du Seuil.

Buchanan, J. M., Tullock, G. (1962). The calculus of consent: logical foundations of constitutional democracy, Ann Arbor: University of Michigan Press.

Burnside C, Dollar, D. (2000). Aid, policies and growth. American Economic Review, 90(4), 847-869.

Byrne J., Fazio G., Piacentino D. (2005). Convergence in TFP among Italian regions: Panel unit roots with heterogeneity and cross sectional dependence, ERSA conference paper No. 591, European Regional Science Association.

Carbone, G. M., Memoli, V., Quartapelle, L. (2016). Are lions democrats? The impact of democratization on economic growth in Africa, 1980-2010. Democratization, 23(1), 27-48.

Chanda, A., Dalgaard, C. J. (2008). Dual economies and international total factor productivity differences. Economica, 75(300), 629-661.

Chauvet, L., Collier, P. (2009). Elections and economic policy in developing countries. Economic Policy, 24(59), 509-550.

Chenery, H. B. (1969). The two gap approach to aid and development: reply to Bruton, American Economic Review, 59(3), 446-449.

Chengchun, L., Sailesh, T. (2018). The impact of foreign direct investment on productivity: New evidence for developing countries. Economic Modelling, Available online 1 December 2018,

Cohen, J., Easterly, W. (2009). Introduction, In: Cohen, J., Easterly, W. (Eds.), Thinking big versus thinking small. What works in development?. Brookings Institution Press. 

Comin, D. A., Mestieri, M. (2014). Technology diffusion: Measurement, Handbook of Economic Growth 2, 565-622. 

Comin, D. A. (2008). Total factor productivity. In: Durlauf S. N., Blume L. E. (Eds.) The New Palgrave dictionary of economics, Second Edition, New York: Palgrave Macmillan.

Comin, D. A., Hobijn, B., Rovito, E. (2006). Five facts you need to know about technology diffusion (NBER Working Paper 11928). National Bureau of Economic Research.

Cottrel, A., Lucchetti, R.J. (2014). Gretl User’s Guide. GNU regression. Econometrics and time-series library. Retrieved August 01, 2017, from

Croissant, Y., Millo, G. (2008). Panel data econometrics in R: The PLM package. Journal of Statistical Software, 27(2), 1-43.

de la Fuente, A., Donénech, R. (2006). Human capital in growth regressions: how much difference does data quality make? Journal of the European Economic Association, 4(1), 1-36.

Delechat C., Ramirez G., Wagh S., Wakemann-Linn J. (2010). How global financial markets affect Sub-Saharan Africa (IMF Staff Papers, 57-1), Washington D.C.: International Monetary Fund.

Devarajan, S., Kanbur, R. (2013). The evolution of development strategy as balancing market and government failure (Working Paper 09), Charles H. Dyson School of Applied Economics and Management, Cornell University.

Dreher, A., Eichenauer, V. Z., Gehring, K. (2016). Geopolitics, aid, and growth: The impact of UN Security Council membership on the effectiveness of aid (World Bank Policy Research Working paper, WPS 7771). Washington, D.C.: World Bank Group.

Duflo, E., Kremer, M., Robinson, J. (2008). How high are rates of return to fertilizer? Evidence from field experiments in Kenya. American Economic Review, 98(2), 482-88.

Duflo, E., Kremer, M., Robinson, J. (2009). Nudging farmers to use fertilizer: Evidence from Kenya. American Economic Review, 101, 2350-2390.

Durlauf, S. N., Johnson, P. A., Temple, J. R. W. (2005). Growth econometrics. In P. Aghion, S. N. Durlauf (Eds.), Handbook of Economic Growth, Vol. 1A, Amsterdam, San Diego: Elsevier.

Easterly, W., Levine, R. (1997). Africa’s growth tragedy: Policies and ethnic divisions. Quarterly Journal of Economics, 112(4), 1203-50.

Easterly, W. (2009). Can the West save Africa? Journal of Economic Literature, 47(2), 373-447.

Edwards, S. (1998). Openness, productivity and growth: what do we really know? Economic Journal, 108(447), 383-398.

Erken, H., Donselaar, P., Thurik, R. (2018). Total factor productivity and the role of entrepreneurship. Journal of Technology Transfer, 43(6), 1493-1521 

Farahmand, S., Sameti, M., Sasan, S. S. (2014). Spatial variations of β-convergence coefficient in Asia (The GWR Approach), Iranian Economic Review, 18(1), 81-101.

Feenstra, R. C., Inklaar, R., Timmer, M. P. (2013). The next generation of Penn World Table. Online Appendix. Retrieved July 26, 2017, from 

Fosu, A. K. (2013). Growth of African economies: productivity, policy syndromes and the importance of institutions. Journal of African Economics, 22(4), 523-551.

Foster-McGregor, N., Isaksson, A., Kaulich, F. (2016). Importing, productivity and absorptive capacity in sub-Saharan African manufacturing and services firms. Open Economies Review, 27(1), 87-117. 

Frija, A., Dhehibi, B., Aw-Hassan, A., Akroush, A., Ibrahim, A. (2015). Approaches to total factor productivity measurements in the agriculture economy. CGIAR Research on Dryland Systems, Retrieved April 5, 2019, from:

Godfrey, L. G. (1978). Testing against general autoregressive and moving average error models when the regressors include lagged dependent variables. Econometrica, 46(6), 1293-1301.

Graham, B. S., Temple, J. R. W. (2006). Rich nations, poor nations: how much can multiple equilibria explain? Journal of Economic Growth, 11(1), 5-41.

Greene, W. H. (2011). Econometric analysis. 7th edition, New York: Pearson.

Grossman, G. M., Helpman, E. (1991). Innovation and Growth in the Global Economy. Cambridge, MA: MIT Press.

Hausmann, R. (2009). The other invisible hand: high Bandwidth development policy. In: Easterly, W., Cohen, J. (Eds.) What Works in Development? Thinking Big and Thinking Small. Washington, D.C.: Brookings Institution Press.

Hausman, J. A. (1978). Specification tests in econometrics. Econometrica, 46(6), 1251-1271.

Hsiao, Ch. (2014). Analysis of panel data. 3rd edn., Cambridge: Cambridge University Press DOI:

IMF (2003). External debt statistics: Guide for compilers and users - Appendix III, Glossary, International Monetary Fund, Washington DC.

Irandoust, M., Ericcson, J. (2005). Foreign aid, domestic savings, and growth in LDCs: An application of likelihood-based panel cointegration. Economic Modelling, 22(4), 616-627.

Islam, N. (1995). Growth empirics: A panel data approach. Quarterly Journal of Economics, 110(4), 1127-1170.

Jajri, I. (2007). Determinants of total factor productivity growth in Malysia, Journal of Economic Cooperation, 28 (3), 41-8.

Judson, R.A., Owen, A.L. (1999). Estimating dynamic panel data models: A guide for macroeconomists. Economic Letters, 65(1), 9-15.

Kang, G. S.,  Won, Y. (2017). Does Korea's Official Development Assistance (ODA) promote its FDI? Journal Of Economic Research, 22(1), 23-46.

Kaufmann, D, Kraay, A., Mastruzzi, M. (2010).  The worldwide governance indicators:  Methodology and analytical issues (World Bank Policy Research Working Paper No. 5430). Washington D.C.: World Bank.

Klenow, P., Rodriguez, A. (1997). The neoclassical revival in growth economics: Has it gone too far? In: Bernanke B. S., Rotemberg J. (Eds.), NBER Macroeconomics Annual 1997, MIT Press.

Kmita, J. (1991). Essays on the theory of scientific cognition, Warszawa, Dordrecht, Boston, London: PWN - Polish Scientific Publishers, Kluwer Academic Publishers.

Krueger, A. B., Lindahl, M. (2001). Education for growth: Why and for whom? Journal of Economic Literature, 39(4), 1101-1136.

Kumar, S., Pacheco, G. (2012). What determines the long-run growth rate in Kenya?. Journal of Policy Modeling, 34(5), 705-718. 

Leibenstein, H. (1966). Allocative efficiency vs. “X-efficiency”, American Economic Review, 56(3), 392-415. 

Levin, A., Lin, C.F., Chu, C.-S.J. (2002). Unit root test in panel data: asymptotic and finite sample properties. Journal of Econometrics, 108(1), 1-24. 

Lin, J. Y., Monga, C. (2010). The growth report and new structural economics (World Bank Policy Research Working Papers Series, 5336). Washington, D.C.: World Bank.

Lipsey, R. G., Carlaw, K.I. (2004) Total factor productivity and the measurement of technological change. Canadian Journal of Economics, 37(4), 1118-1150.

Lipton, M. (2012). Income from work: the food-population-resource crisis in the 'Short Africa', Leontief Prize lecture, Tufts University, Medford, MA.

Loxley, J., Sackey, H. (2008). Aid effectiveness in Africa, African Development Review 20(2), 163-199.

Malunga, C. (2009). Understanding organizational leadership through Ubuntu. London: Adonis and Abbey Publishers.

Mankiw, D., Romer, D. W. (1992). A contribution to the empirics of economic growth. Quarterly Journal of Economics, 107(2), 407-437.

McMillan, M., Rodrik, D., Verduzco-Gallo, Í. (2014). Globalization, structural change, and productivity growth, with an Update on Africa. World Development, 63, 11-32. 

Moyo, D. (2009). Dead aid: why aid is not working and how there is a better way for Africa, Vancouver: Douglas & Mcintyre.

Nachega, J. C., Fontaine, T. (2006). Economic growth and total factor productivity in Niger (IMF Working Paper, WP/06/208). Washington D.C.: International Monetary Fund.

Nickell, S. (1981). Biases in dynamic models with fixed effects. Econometrica, 49(6), 1417-1426.

Ovadia, J. S. (2015). The petro-developmental state in Africa: Making oil work in Angola, Nigeria and the Gulf of Guinea. London: Hurst.

Papanek, G. (1972). The effect of aid and other resources on savings and growth in less developed countries. Economic Journal, 192, 934-50.

Pesaran, M. H. (2015). Testing weak cross-sectional dependence in large panels. Econometric Reviews Econometric Review, 34(6-10), 1089-1117.

Radelet, S., Clemens, M., Bhavnani, R. (2004). Aid and growth: the current debate and some new evidence. Centre for Global Development, February 2004.

Rajan, R. G., Subramanian, A. (2011). Aid, Dutch disease, and manufacturing growth. Journal of Development Economics, 94(1), 106-118.

Ravallion, M. (2009). Should the Randomistas rule? Economists’ Voice, 6(2). Retrieved July 28, 2017, from

Rodrik, D. (2009). The new development economics: We shall experiment, but how shall we learn?. In: Easterly W., Cohen J. (Eds.) What works in development? Thinking big and thinking small. Washington, D.C.: Brookings Institution Press.

Rodrik, D. (2014). An African growth miracle? Retrieved July 15, 2017, from

Romer, P. M. (1990). Endogenous technological change. Journal of Political Economy, 98(5), part II, S71-102.

Roodman, D. (2009). How to do xtabond2: An introduction to difference and system GMM in Stata. The Stata Journal, 9(1), 86-136.

Sachs, J. D., McArthur J. W., Schmidt-Traub G., Kruk M., Bahadur Ch., Faye M., McCord G. (2004). Ending Africa's poverty trap. Brookings Papers on Economic Activity, 2004(1), 117-216.

Solow, R. (2001). What have we learned from a decade of empirical research on growth? Applying Growth Theory across Countries. World Bank Economic Review, 15, 283-288.

Solow, R. (2016). Resources and economic growth. American Economy, 61(1), 52-60.

Ssozi, J., Asongu, S. A. (2016). The comparative economics of catch-up in output per worker, Total factor productivity and technological gain in Sub-Saharan Africa. African Development Review, 28, 215-228. 

Świerczyńska, K. (2019). Uwarunkowania i zróżnicowanie rozwoju gospodarczego krajów Afryki Subsharyjskiej [Conditions and diversification of economic development of Sub-Saharan African countries], Warszawa: CeDeWu (original - in Polish).

Walley, B., Cushing, M. (2013). Development ad and foreign R&D spillovers in sub-Saharan Africa. International Journal of Applied Economcs, 10(2), 10-31.

Wooldridge, J. M. (2002). Econometric analysis of cross-section and panel data. Cambridge, London: MIT Press.

Keywords Official development assistance, technical cooperation, sub-Saharan Africa, technology absorption, total factor productivity
Pages 158-186
Download Full PDF Download
  Previous Article | Back to Volume | Next Article
Search in articles
Journal Published articles
BEH 626
Journal Hits
BEH 1499778
Journal Downloads
BEH 47765
Total users online -