Foreign aid and subnational development: A grid cell analysis

Arbeitspapier

We examine the impact of geo-referenced World Bank development programs on subnational development using equally sized grid cells with a spatial resolution of 0.5 decimal degrees latitude x longitude as the unit of investigation. The proposed grid cell approach solves a number of endogeneity problems discussed in the aid effectiveness literature that make it difficult to identify the true effect of foreign aid on development outcomes due to the presence of unobserved heterogeneity, lack of key country-level controls, aggregation bias, simultaneity and/or the presence of reverse causality in the association between foreign aid and economic growth, measurement errors, and endogenous sample selection bias. The estimates reveal that World Bank foreign aid projects contribute significantly to grid cell economic activity measured by night-time lights growth. This finding is robust to the presence of unobserved country-year and grid-cell-specific unobserved heterogeneity, and to the inclusion of a full set of grid-cell-specific socioeconomic, demographic, conflict-related, biogeographic, and climatic controls. Additional sensitivity tests confirm the robustness of the main findings to various econometric estimators, alternative model specifications, and different spatial aggregation levels.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Oldenburg Discussion Papers in Economics ; No. V-407-18

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models ; Foreign Aid ; Economic Development: General ; Development Planning and Policy: General ; Economic Growth and Aggregate Productivity: General ; General Regional Economics (includes Regional Data)
• Subject: Aid Effectiveness ; Geo-Referenced Aid Projects ; Economic Development ; Economic Growth ; Grid-Cell Analysis ; GIS Data ; Satellite Night-Time Light Data

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bitzer, Jürgen ; Gören, Erkan
• Event: Veröffentlichung
• (who): University of Oldenburg, Department of Economics
• (where): Oldenburg
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/175419
• Last update: 10.03.2025, 11:45 AM CET