Foreign Aid and Subnational Development: A Grid Cell Analysis
Jun 27, 2018
Jürgen Bitzer, Erkan Gören
Bitzer, Jürgen and Erkan Gören. 2018. Foreign Aid and Subnational Development: A Grid Cell Analysis. AidData Working Paper #55. Williamsburg, VA: AidData at William & Mary.
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 × 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.
World Bank IBRD-IDA Projects
World Bank Geocoded Research Release, Version 1.4.2
This geocoded dataset includes all projects approved from 1995-2014 in the World Bank IBRD/IDA lending lines. It tracks more than $630 billion in commitments for 5,684 projects across 61,243 locations.