Dr. Hassen Wako

Financing Development from External Sources: Essays on Aid, FDI and Trade

Year: 2018

Théophile T. Azomahou and Mbaye Diene


This dissertation is an empirical investigation into the interaction between institutions, economic globalisation and development. It looks beyond the growth effect of aid and FDI in the context of Sub-Saharan Africa (SSA), and the role of institutions in explaining comparative advantage. The first paper examines the institutional and growth effects of development aid. The long-run growth effect of (aggregate) aid from ‘traditional’ donors is robustly non-positive, and the indirect effect is negative. Disaggregation reveals donor-heterogeneity. Chinese aid outperforms aggregate aid from traditional donors with respect to growth; however, it has a negative institutional effect. Recipient-heterogeneity is largely a short-run phenomenon. The second paper deals with the empirical association between FDI and some macroeconomic variables in the context of Sub-Saharan Africa. Economic growth enhances institutional quality, whereas FDI appears to raise corruption and undermine the rule of law and accountability. While most results are in agreement with some previous studies, the study also identifies detrimental institutional and deindustrializing effects of FDI which have hitherto been overlooked. The final paper assesses the influence of institutions on comparative advantage. The findings indicate that institutions are robust sources of comparative advantage. Developed regions reap the benefit of institutional reforms through both margins whereas developing regions benefit more from the extensive margin. The benefits to developing regions come more from trade within their regions than their trade vis-à-vis the developed regions.

Selected publications by Hassen Wako

Articles (journal, professional, popular)
Wako, Hassen, 2018, `Aid, institutions and economic growth in sub-Saharan Africa: Heterogeneous donors and heterogeneous responses, Review of Development Economics, 22, More information
Wako, Hassen, 2012, `Demographic changes and economic development: Application of the vector error correction model (VECM) to the case of Ethiopia, Journal of Economics and International Finance, 4, More information
Wako, Hassen, 2011, `Effectiveness of foreign aid in sub-Saharan Africa: Does disaggregating aid into bilateral and multilateral components make a difference?, Journal of Economics and International Finance, 3, More information

UNU-MERIT Working Papers
Wako, Hassen, 2018, Foreign direct investment in sub-Saharan Africa: Beyond its growth effect, UNU-MERIT Working Paper 2018-013
Wako, Hassen, 2016, Aid, institutions and economic growth: Heterogeneous parameters and heterogeneous donors, UNU-MERIT Working Paper 2016-009

External working papers
Wako, Hassen, Théophile T. Azomahou & Hibret Maemir, 2018, Contractual Frictions and the Margins of Trade, More information

Conference contributions
Wako, Hassen, 2017, Aid, Institutions and Economic Growth in Sub-Saharan Africa: Heterogeneous Donors and Heterogeneous Responses, ‘THE WORLD AND AFRICA’ IN THE 21ST CENTURY: CHINA, THE WEST, AND ECONOMIC INTERVENTIONS IN AFRICA. A Conference in the Critical Tradition of W.E.B. Du Bois, More information
Wako, Hassen, 2016, Foreign direct investment, institutions, economic growth and industrialization in Sub-Saharan Africa, VIENNA INVESTMENT CONFERENCE: QUALITY FDI, GROWTH AND DEVELOPMENT. 14-15 September 2016, Vienna International Centre, Vienna, Austria, More information

Wako, Hassen, 2018, Economic Globalization, Institutions and Development: Essays on Aid, Foreign Direct Investment and Trade, PhD dissertation Maastricht University / United Nations University, More information