Is Aid Good for the Poor in Sub-Saharan Africa?
We contribute to the aid-poverty literature in Sub-Saharan Africa in three fundamental respects. First, we sidestep the controversial aid-growthpoverty relationship by analysing the direct impacts of aid on poverty in Sub- Saharan Africa. Second, in line with previous studies, we first analysed t...
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| Format: | Article |
| Language: | English |
| Published: |
Institute of Business Administration
2025-06-01
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| Series: | Business Review |
| Subjects: | |
| Online Access: | https://ir.iba.edu.pk/businessreview/vol20/iss1/1/ |
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| Summary: | We contribute to the aid-poverty literature in Sub-Saharan Africa
in three fundamental respects. First, we sidestep the controversial aid-growthpoverty
relationship by analysing the direct impacts of aid on poverty in Sub-
Saharan Africa. Second, in line with previous studies, we first analysed the
impact of aid on poverty headcount, poverty gap, and poverty gap squared.
Third, we complemented this analysis with an analysis of the direct impact of
aid on the incomes of the poor, followed by an analysis of aid on inequality.
Such an approach allowed us to draw nuanced conclusions about how effective
foreign aid is in alleviating overall poverty, poverty gap, poverty severity, and
deeper issues related to income disparity among impoverished populations in
the Sub-Saharan African (SSA) region. Relying on the system GMM estimator
that is robust to endogeneity, results show that overall aid and multilateral
aid have a statistically significant impact on reducing poverty in Sub-Saharan
Africa. However, results show that the impact of bilateral aid on the poverty
rate, poverty gap, and poverty severity is inconclusive. Results also show that
while both overall aid and multilateral aid raise the incomes of the poor and
reduce inequality, bilateral aid marginally reduces income disparity but does not
increase the incomes of the poor. Our findings imply that policymakers must
adopt a nuanced approach that leverages successful implementation of overall
and multi-lateral aid while ensuring targeted interventions directly benefit those
living in poverty. |
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| ISSN: | 1990-6587 2788-9599 |