Official Development Assistance and its Impact on Governance in short term: The Threshold theory

Abstract

This paper is part of a perspective on the Official Development Assistance (ODA) as a means of international cooperation, and its impact on governance in the beneficiary developing countries in short term.

For several years, governance has emerged to the surface of the economic debate as a central concept in the international economy, as it reflects the improvement of the socio-political environment; this environment should help support economic growth rate recorded in developing countries and preserve their human development. Mainly since several authors, such as: Burnside and Dollar[1] (2000), Hansen and Tarp[2] (2001), emphasize that ODA improves economic growth only in developing countries with a healthy political and economic environment.

This article is based on the work of Stephen Knack[3] (1999); the author was able to demonstrate that the aid granted to developing countries is harmful. In fact, the funds allocated by donors deteriorate governance in beneficiary countries. Knack (1999) went further to study samples from the studied basket through arbitrary determination of thresholds, e.g.: countries receiving aid> 5%, African countries, spaces that have a GDP per capita <$ 2000.... Despite this segmentation of the studied basket Knack reached the same conclusions mentioned above, proving a negative impact of aid on governance in recipient countries, because of opportunities for corruption in the disbursement of funds.

This article is based on a solid econometric methodology for the determination of aid thresholds with respect to its impact on governance in developing countries. In this paper, I selected a basket comprising the Arab and sub-Saharan African countries, and I have distinguished between the short term and long term impacts of aid.