Foreign Aid and Economic Growth: An Overview of Empirical Literature

Abstract

This paper provides an overview of the empirical literature on the relationship between foreign aid and economic growth. It reviews key theoretical perspectives, examines major empirical findings, and identifies gaps in the existing literature. The evidence remains mixed, with three main viewpoints emerging: some studies find that aid promotes economic growth, others argue that it hinders growth, while a third group suggests that its effectiveness depends on country-specific factors such as institutions and policy environment. In light of these mixed findings, the paper highlights the need for more refined analytical approaches. Future research should focus on developing models that better capture the complexity of the aid-growth relationship and account for the various factors influencing its outcomes.