The Millennium Development Goals: Does Aid Help?

Although poverty-eradication has always been a priority in many governments' agenda, one in four people in the developing world still live in poverty. This study examines how foreign aid, human capital and economic policies, among others, affect real GDP growth and other dimensions of poverty, measured in terms of the Millennium Development Goals (MDGs). Our empirical results suggest that while aid appears to be a significant, albeit negative indicator of real GDP per capita growth, it is a positive determinant of other MDG outcomes. Human capital and good economic policies do not appear to have unique and significant effects on the MDG outcomes, but allowing for interactions with aid, these become more robust indicators of the effectiveness of aid in achieving the MDG.