wow-inequalities/02-data/intermediate/wos_sample/b5e19ab19243173c2feb137711030c74-akobeng-eric/info.yaml

abstract: 'Purpose This paper examines the relationship between foreign aid,

  institutional democracy and poverty. The paper explores the direct

  effect of foreign aid on poverty and quantifies the facilitating role of

  democracy in harnessing foreign aid for poverty reduction in Sub-Saharan

  Africa (SSA). Design/methodology/approach The paper attempts to address

  the endogenous relationship between foreign aid and poverty by employing

  the two-stage least squares instrumental variable (2SLS-IV) estimator by

  using GDP per capita of the top five Organization for Economic

  Co-operation and Development (OECD) countries sending foreign aid to SSA

  countries scaled by the inverse of the land area of the SSA countries to

  stimulate an exogenous variation in foreign aid and its components. The

  initial level of democracy is interacted with the senders'' GDP per

  capita to also instrument for the interaction terms of democracy,

  foreign aid and its components. Findings The results suggest that

  foreign aid reduces poverty and different components of foreign aid have

  different effects on poverty. In particular, multilateral source and

  grant type seem to be more significant in reducing poverty than

  bilateral source and loan type. The study further reveals that

  democratic attributes of free expression, institutional constraints on

  the executive, guarantee of civil liberties to citizens and political

  participation reinforce the poverty-reducing effects of aggregate

  foreign aid and its components after controlling for mean household

  income, GDP per capita and inequality. Research limitations/implications

  The methodological concern related to modeling the effects of foreign

  aid on poverty is endogeneity bias. To estimate the relationship between

  foreign aid, democracy and poverty in SSA, this paper relies on a

  2SLS-IV estimator with GDP per capita of the top five aid-sending OECD

  countries scaled by the inverse of land area of the SSA countries as an

  external instrument for foreign aid. The use of the five top OECD''s

  Development Assistance Committee (OECD-DAC) countries is due to the

  availability of foreign aid data for these countries. However,

  non-OECD-DAC countries such as China and South Africa may be important

  source of foreign aid to some SSA countries. Practical implications The

  findings further suggest that the marginal effect of foreign aid in

  reducing poverty is increasing with the level of institutional

  democracy. In other words, foreign aid contributes more to poverty

  reduction in countries with democratic dispensation. This investigation

  has vital implications for future foreign aid policy, because it alerts

  policymakers that the effectiveness of foreign aid can be strengthened

  by considering the type and source of aid. Foreign aid and quality

  political institution may serve as an important mix toward the

  achievement of the Sustainable Development Goals 2030 and the Africa

  Union Agenda 2063. Social implications As the global economy faces

  economic and social challenges, SSA may not be able to depend heavily on

  foreign partners to finance the region''s budget. There is the need for

  African governments to also come out with innovative ways to mobilize

  own resources to develop and confront some of the economic challenges to

  achieve the required reduction in poverty. This is a vision that every

  country in Africa must work toward. Africa must think of new ways of

  generating wealth internally for development so as to complement foreign

  aid flows and also build strong foundation for welfare improvement,

  self-reliance and sustainable development.

  Originality/value This existing literature does not consider how

  democracy enhances the foreign aid and poverty relationship. The

  existing literature does not explore how democracy enhances grants,

  loans, multilateral and bilateral aid effectiveness in reducing poverty.

  This paper provides the first-hand evidence of how institutional

  democracy enhances the poverty-reducing effects of foreign aid and its

  components. The paper uses exogenous variation in foreign aid to

  quantify the direct effect of foreign aid and its components on poverty.'
affiliation: 'Akobeng, E (Corresponding Author), Lancaster Univ Ghana, Dept Business
  Studies, Accra, Ghana.

  Akobeng, Eric, Lancaster Univ Ghana, Dept Business Studies, Accra, Ghana.'
author: Akobeng, Eric
author-email: e.akobeng@lancaster.edu.gh
author_list:
- family: Akobeng
  given: Eric
da: '2023-09-28'
doi: 10.1108/JES-05-2019-0225
earlyaccessdate: APR 2020
files: []
issn: 0144-3585
journal: JOURNAL OF ECONOMIC STUDIES
keywords: Democracy; Poverty; Foreign aid
keywords-plus: 'POVERTY REDUCTION; DOMESTIC SAVINGS; GROWTH; REMITTANCES; POLICIES;

  INEQUALITY; ASSISTANCE; IMPACT'
language: English
month: OCT 26
number: '7'
number-of-cited-references: '67'
pages: 1689-1710
papis_id: 9672336f473d48f5accafcbf54f30ffb
ref: Akobeng2020harnessingforeign
times-cited: '3'
title: 'Harnessing foreign aid for the poor: role of institutional democracy'
type: article
unique-id: WOS:000530055200001
usage-count-last-180-days: '5'
usage-count-since-2013: '19'
volume: '47'
web-of-science-categories: Economics
year: '2020'