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Sanjay Reddy and Ms. Camelia Minoiu
We analyze the growth impact of official development assistance to developing countries. Our approach is different from that of previous studies in two major ways. First, we disentangle the effects of two kinds of aid: developmental and non-developmental. Second, our specifications allow for the effect of aid on economic growth to occur over long periods. Our results indicate that developmental aid promotes long-run growth. The effect is significant, large and robust to different specifications and estimation techniques.
Sanjay Reddy and Ms. Camelia Minoiu

-promoting aid expenditures—the ideal proxy for DA . For example, sector-level aid disbursement data (e.g., aid spent on social infrastructure and services, health and education, employment, and housing and social services) are unavailable for the period considered (1960–2000). 10 We employ a second-best solution based on the assumption that DA is likely undergirded by the developmental motive. Accordingly, we draw on the findings of the aid allocation literature and use established aid-quality donor rankings to identify development-friendly donor countries. DA measures