Impacts of foreign assistance on less-developed countries' agricultural productivity

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Virginia Tech


The purpose of this study was to analyze the effects of foreign assistance on less-developed countries' agricultural productivity. The study employed a Cobb- Douglas production function model. Several alternative model specifications were utilized in an attempt to model the true relationship between agricultural inputs and output. First, the foreign aid variable was included as a distributed lag of past foreign aid receipts and then as a three years moving average of aid expenditures. Second, dummy variables were introduced to allow the effects of aid to differ by income levels, yearly factors, and geographical regions. An inter country pooled cross section and time-series data for a set of 59 countries was used in the models from 1975-1984. The empirical results did not support the hypothesis that the aggregate effect of foreign aid on agricultural production ls positive. However, the results of the model including dummy variables which account for the regional differences of aid effects revealed that the contributions of aid differ by geographical regions.