Dynamics of Foreign Aid and Human Development in South and South-East Asia: Analyzing the Effectiveness of Macro-Institutional Factors

Abstract

Does foreign aid impede or catalyze human development in South and South-East Asia post-1990s? We argue that foreign aid impacts human development negatively in the region overall due to the structural differences in infrastructure development, democratic regimes, patterns of external debt, trading intensity and other macroeconomic factors. Our empirical evidence further justifies that other than aid, improvements in infrastructure sectors and quality of democratic settings beget human development in the region. Considering further angles of external debt and domestic investment into the picture, we find that rising external debt negates, improves domestic investment and accelerates human development. While comparing both regions, we find a noticeable difference in the impacts of macro-institutional factors on human development. However, the impacts of aid on human development remain insignificant.

KEYWORDS:

• Foreign aid
• human development
• Asia
• external debt

JEL Codes:

• F35
• O15
• N15

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Devi Prasad Dash

Dr Devi Prasad Dash is working as the Assistant Professor of Economics in the School of Management and Entrepreneurship, Indian Institute of Technology, Jodhpur, India. His areas of specialization are Energy Economics, Economics of Climate Change, Economics of Growth and Development and Economics of Crime.

Narayan Sethi

Dr Narayan Sethi is a Professor of Economics and currently Head of the Department (HoD), Department of Humanities and Social Sciences, National Institute of Technology (NIT) Rourkela, Odisha, India. His area of research includes Macro and Open Economy, Development Economics, Monetary Economics and Energy and Environment.

Paresh Chandra Barik

Mr Paresh Chandra Barik is working as the Assistant General Manager in the State Bank of India Branch, London in the United Kingdom.