This is the message I take from the most comprehensive analysis to date of the cross-national evidence on the effect of aid and growth. The paper in question is by Raghu Rajan and Arvind Subramanian, both formerly of the IMF. (Rajan is now back at the University of Chicago, and Subramanian is at the Peterson Institute of International Economics.) What sets the paper apart is its careful consideration of causality issues, and its broad scope and coverage, looking at the relationship under a number of different circumstances and settings. Their bottom line:
we find little robust evidence of a positive (or negative) relationship between aid inflows into a country and its economic growth. We also find no evidence that aid works better in better policy or geographical environments, or that certain forms of aid work better than others. Our findings suggest that for aid to be effective in the future, the aid apparatus will have to be rethought.