1. Etienne Ancito Lynchburg College Economics Thesis
Foreign Aid Allocation and Impact in Latin America and the Caribbean (LAC): A Cross-Country Analysis of Foreign Aid impact on GDP Per Capita and Life Expectancy.
Etienne Ancito
Lynchburg College
Economics Thesis

2. Motivation For Research Study
Stagnation of Latin American and Caribbean economies, while the region receives substantial foreign aid.
OECD 2016 Report.
Source: OECD - DAC ;

3. Contribution of this Paper
A larger sample of countries and independent variables were studied, which enables better analysis of the stagnation.
In addition, if the causes for the lack of effectiveness can be explained, then perhaps LAC governments could invest in eliminating the factors that stunt growth in their economies.
This would encourage donors to be more generous seeing that their liberality alleviates poverty by stimulating economic development.

4. Background The flypaper effect theory Fiduciary risk The cobra effect
Aid Fungibility
Foreign Aid’s goal

5. Research Questions What is foreign aid’s impact on GDP per Capita?
What is foreign aid’s impact on life expectancy?
What is foreign aid’s impact on GDP per Capita?
If foreign aid has a positive impact on GDP per Capita, then does an increase in GDP per Capita causes an increase in life expectancy?

6. Literature
Ekanayake and Chatma (2010) found, similarly to previous studies, that foreign aid has mixed effects, and in some cases, it even produces adverse effects on economic growth in developing countries.
Palloni & Souza (2013 conucted a research on life expectancy in Latin America and the Carribean and found that historically life expectancy in this region saw little improvement until the 1950s when medical, nutritional and public health interve.tions began to be implemented.
Shpak's (2012) research findings included the determination of earmarks and bilateral aid for health improvement to have a positive effect on avoidable or senseless deaths.

7. Model Development
The OLS method (Ordinary Least Squares) was used to perform a set of two Ordinary Least Squares regressions. This method estimates the unknown parameters in a linear regression model, with the goal of minimizing the sum of the squares residuals between the observations.

8. Data Sources World Bank’s Development Indicators Database
The Heritage Foundation
Transparency International
The United Nations Development Programme

9. Life Expectancy Model LIFEEXPECTANCY= β0 + β1 LAGGEDLIFEEXPECTANCY +
β2NETODAPERCAPITA + β3LAGGEDNETODAPERCAPITA + β4GDPPERCAPITA + β5IMPROVEDWATERSOURCE + β6IMPROVEDSANITATIONFACILITIES + β7INCIDENCEOFTUBERCULOSIS + β8PREVALENCEOFHIV + β9ECONOMICFREEDOMSCORE + β10DEATHRATE + β11UNEMPLOYMENTLABORFORCE + ε (1)

10. Life Expectancy Variables Descriptions
Variable Name
Description (World Bank and Heritage)
LIFEEXPECTANCY
Life expectancy at birth, total (years)
LAGGEDLIFEEXPECTANCY
Lagged Life expectancy at birth, total (years)
NETODAPERCAPITA
Net ODA received per capita (current US$)
LAGGEDNETODAPERCAPITA
GDPPERCAPITA
GDP per capita (current US$)
IMPROVEDSANITATIONFACILITIES
Improved sanitation facilities (% of population with access)
IMPROVEDWATERSOURCE
Improved water source (% of population with access)
INCIDENCEOFTUBERCULOSIS
Incidence of tuberculosis (per 100,000 people)
PREVALENCEOFHIV
Prevalence of HIV, total (% of population ages 15-49)
ECONOMICFREEDOMSCORE
Economic Freedom overall score
DEATHRATE
Death rate, crude (per 1,000 people)

12. Life Expectancy Variables Descriptions and Expected Signs
Variable Name
Description (World Bank and Heritage)
Expected Sign Direction
LIFEEXPECTANCY
Life expectancy at birth, total (years)
Dependent Variable
LAGGEDLIFEEXPECTANCY
Lagged Life expectancy at birth, total (years) +
NETODAPERCAPITA
Net ODA received per capita (current US$) -
LAGGEDNETODAPERCAPITA
GDPPERCAPITA
GDP per capita (current US$)
IMPROVEDSANITATIONFACILITIES
Improved sanitation facilities (% of population with access)
IMPROVEDWATERSOURCE
Improved water source (% of population with access)
INCIDENCEOFTUBERCULOSIS
Incidence of tuberculosis (per 100,000 people)
PREVALENCEOFHIV
Prevalence of HIV, total (% of population ages 15-49)
ECONOMICFREEDOMSCORE
Economic Freedom overall score
DEATHRATE
Death rate, crude (per 1,000 people)

14. GDP Per Capita Model
GDPPERCAPITA = β0 + β1NETODA + β2LAGGEDNETODAPERCAPITA + β3CORRUPINDEX + β4ECONOMICFREEDOMSCORE + β6CCSERVICES + β7NATURALRESOURCESRENTS + β8FOREIGNDIRECTINVESMENT + β9GOODSSERVICESEXPORTS + β10EMPLOYMENT1524POPULATION + β11UNEMPLOYMENTLABORFORCE + ε (2)

15. GDP Per Capita Variables Descriptions
Variable Name
Brief Description
GDPPERCAPITA
GDP per capita (current US$)
NETODAPERCAPITA
Net ODA received per capita (current US$)
LAGGEDNETODAPERCAPITA
CORRUPINDEX
Corruption Index
ECONOMICFREEDOMSCORE
Economic Freedom overall scorehttp://
CCSERVICES
Computer, communications and other services (% of commercial service exports)
NATURALRESOURCESRENTS
Total natural resources rents (% of GDP)
FOREIGNDIRECTINVESMENT
Foreign direct investment, net inflows (% of GDP)
GOODSSERVICESEXPORTS
Exports of goods and services (% of GDP)
EMPLOYMENT1524POPULATION
Employment to population ratio, ages 15-24, total (%) (modeled ILO estimate)
UNEMPLOYMENTLABORFORCE
Unemployment, total (% of total labor force) (modeled ILO estimate

17. GDP Per Capita Variables Descriptions and Expected Signs
Variable Name
Brief Description
Expected Sign Direction
GDPPERCAPITA
GDP per capita (current US$)
Dependent variable
NETODAPERCAPITA
Net ODA received per capita (current US$) +
LAGGEDNETODAPERCAPITA
CORRUPINDEX
Corruption Index
ECONOMICFREEDOMSCORE
Economic Freedom overall scorehttp://
CCSERVICES
Computer, communications and other services (% of commercial service exports)
NATURALRESOURCESRENTS
Total natural resources rents (% of GDP)
FOREIGNDIRECTINVESMENT
Foreign direct investment, net inflows (% of GDP)
GOODSSERVICESEXPORTS
Exports of goods and services (% of GDP)
EMPLOYMENT1524POPULATION
Employment to population ratio, ages 15-24, total (%) (modeled ILO estimate)
UNEMPLOYMENTLABORFORCE
Unemployment, total (% of total labor force) (modeled ILO estimate _

19. List of countries studied in the Life Expectancy regression equation listed by HDI ranking as of 2014 Source:
Argentina
Chile
Uruguay
Panama
Cuba
Costa Rica
Venezuela, RB
Mexico
Brazil
Peru
Ecuador
Colombia
Jamaica
Dominican Republic
Suriname
Paraguay
El Salvador
Bolivia
Nicaragua
Guatemala
Honduras
Haiti
List of countries studied in the GDP Per Capita Regression equation listed by HDI ranking as of 2014 Source:
Argentina
Chile
Uruguay
Panama
Costa Rica
Venezuela, RB
Mexico
Brazil
Peru
Ecuador
Colombia
Jamaica
Dominican Republic
Paraguay
El Salvador
Bolivia
Nicaragua
Guatemala
Honduras
Haiti

23. Implications For governments and policy markers:
Implementation of expansionary policies
Endeavour to decrease corruption
Create an enabling environment to allow foreign aid and foreign direct investments to have a significant impact.

24. Future Research Life Expectancy Health expenditure Natural disasters
Educational attainment
GDP Per Capita
Agricultural output
Educational attainment (The more secondary degrees, the more stable (Collier 2007))
Political Stability Index