The magnitude of negativity (which is consistent across specifications and development dynamics) is highest for NODA from Multilateral donors, followed by NODA from DAC countries.

The findings broadly indicate that development assistance is detrimental to GDP growth, GDP per capita growth and inequality adjusted human development. The effects of Total Net Official Development Assistance (NODA), NODA from the Development Assistance Committee (DAC) and NODA from Multilateral donors on economic prosperity (at national and per capita levels) are also examined. This paper assesses the aid-development nexus in 52 African countries using updated data (1996–2010) and a new indicator of human development (adjusted for inequality). Usage of the inequality adjusted human development index first published in 2010, corrects past works of the bunch of criticisms inherent in the first index. Originality/value – These findings are based on data collected after pioneering works on the aid-development nexus.

In the meantime, it is up to people who care about the poor to hold aid agencies accountable for piecemeal results. Social implications – It is a momentous epoque to solve the second tragedy of foreign aid it is high time economists and policy makers start rethinking the models and theories on which foreign aid is based. Given concerns on the achievement of the MDGs, the relevance of these results point to the deficiency of foreign aid as a sustainable cure to poverty in Africa. Findings – The findings broadly indicate that development assistance is detrimental to GDP growth, GDP per capita growth and inequality adjusted human development. Robustness checks are ensured by: (1) the use of alternative aid indicators (2) estimation under restricted and unrestricted hypotheses and (3) adoption of two interchangeable sets of instruments. In the third-step, the strength and validity of the instruments are examined with the Cragg-Donald and Sargan overidentifying restrictions tests respectively. In the second-step, we verify that the instrumental variables are exogenous to the endogenous components of explaining variables(aid dynamic channels) conditional on other covariates(control variables). The first-step consists of justifying the choice of the estimation technique with a Hausman-test for endogeneity.

Instruments include: income-levels, legal-origins and religious-dominations. Design/methodology/approach – The estimation technique used is a Two-Stage-Least Squares Instrumental Variable approach. Purpose – The purpose of this paper is to assess the aid-development nexus in 52 African countries using updated data (1996-2010) and a new indicator of human development(adjusted for inequality).

Dead aid book review