Transformations  in
Business & Economics

Is Foreign Aid Effective In Promoting Development? The African Case
Gabriel Staicu, Razvan Barbulescu, Liviu Catalin Moraru

ABSTRACT. In 2000, all political leaders of developed countries agreed to keep and increase their efforts to eradicate poverty in the Third World countries. According to this Agenda, by the end of 2015, a series of economic and social progress indicators identified in eight Millennium Development Goals has to be achieved. So far, both, governments of developed countries and international financial institutions, as it is presented in their own evaluations, have obtained significant results in this regard. The aim of this paper is to analyse both, theoretically and empirically the effectiveness of foreign aid in terms of human development indicators in the last years taking as a sample 45 African countries. Unfortunately, as this paper shows, many of the West's efforts to help the rest of the world and especially Africa, "have done so much ill and so little good" in order to improve the quality of life. Not surprisingly, as our research results show, economic freedom seems to be a better institutional recipe for development than foreign aid.

KEYWORDS: foreign aid, millennium development goals, poverty trap, human development, economic freedom.

JEL classification: F2l, F53, E02, E61, H77.