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Aid, Protestant Missionaries, and Growth

by William Roberts Clark, John A. Doces, and Robert D. Woodberry. Reading for Tuesday, 1 May.

It has been extremely difficult to demonstrate that foreign aid has any positive influence on economic growth. Easterly, Levine and Roodman (2004) challenge the robustness of Burnside and Dollar’s (2000) claim that aid is associated with growth when governments enact the right policies. We show that Burnside and Dollar’s result disappears entirely when adequate attention is paid to either the correct interpretation of interaction terms or identification in their two-stage least squares equations. In addition, we are unable to find a set of political institutions that encourage a link between foreign aid and growth. The most encouraging news they have is that some political institutions appear to mitigate the otherwise deleterious effects of foreign aid. On the whole it appears that state-to-state assistance has not been of much help in fostering economic growth in developing countries. 

Woodberry (2004) identifies a form of non-state cross-border involvement with beneficent effects. Specifically, they argue that protestant missionary activity in the early twentieth century was an important source of economic development because it encouraged mass education (and therefore, human capital accumulation), the growth of a middle class, and democratization. In this paper, we will attempt to compare the effects of protestant missionary activity and foreign aid flows on economic development. Are these two forms of cross-border “assistance” substitutes or compliments or neither? Data on protestant missionary activity collected by Woodberry will be merged with the Easterly, Levine and Roodman data set in order to answer this question.

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