Andrea Civelli, associate professor of economics at the Walton College; Andrew Horowitz, a Walton College economics professor, and Arilton Teixeira of the Fucape Business School in Brazil have had their paper “Foreign Aid and Growth: A Sp P-VAR Analysis Using Satellite Sub-National Data for Uganda” accepted for publication by the Journal of Development Economics.
“The Journal of Development Economics is the top journal in development economics,” said Bill Curington, chair of the Walton College Department of Economics.
“This paper proposes a subnational official development aid impact measurement strategy that simultaneously tackles the endogeneity and aggregation problems by combining a spatial panel vector-autoregressive model and multiple sources of regional data. We assess the potential of this strategy, critically discuss its limitations, and provide a demonstration using regional data from Uganda,” the authors write in their introduction.
From the paper’s abstract:
We develop a measurement strategy for the impact of foreign aid based on a regional spatial panel vector-autoregressive model (Sp P-VAR). We illustrate the strategy using Ugandan districts. Data for the regional units (ADM2) is assembled combining satellite sources for socio-economic activity, geo-located aid disbursements, and traditional household surveys. We find statistically significant positive and persistent effects of aid shocks on nighttime luminosity. Mapping nightlights to economic activity, the results suggest that the economic magnitude of these effects is small, but significant — with a multiplier between 4 and 5 in the long-run. The VAR addresses endogeneity concerns associated with non-random aid assignment.