Foreign Aid and Structural Change

Calumn Hamilton, University of Groningen

This paper contrasts the effects of DAC and Chinese aid on the sectoral structure of Sub-Saharan African economies. It extends the GGDC/UNU-WIDER Economic Transformation Database with sub-national sectoral employment data such that analysis can be performed at the national and sub-national levels. 2SLS regressions are estimated using a novel IV strategy for identifying the effects of aid which exploits exogenous variation in the frequency and severity of natural disasters in donor countries. The findings suggest that Chinese aid is more conducive for industrialization in recipient countries than DAC aid. On average, a ten percent increase in DAC aid causes an estimated 0.14 percentage point decrease in the manufacturing employment share after four years, whereas Chinese aid may cause an increase. Policy implications for DAC aid and industrialization-led development strategies are discussed. 

About the speaker

Calumn is a PhD candidate at the University of Groningen and an affiliate of the Groningen Growth and Development Centre. His research focuses on macroeconomic development, structural change, aid effectiveness, financial inclusion, and development in Sub-Saharan Africa and the countries of the former Soviet Union. Calumn worked on the GGDC/UNU-WIDER Economic Transformation Database and is involved in various forthcoming macroeconomic database projects. Calumn's book, An Advanced Introduction to Financial Inclusion, is coauthored with Robert Lensink and Charles Adjasi and is forthcoming with Edward Elgar publishers in July. 

Date: 31 March 2022

Time: 12:00 - 13:00  CEST