1. Aid, Protestants and Growth
William Roberts Clark (University of Michigan)
John Doces (Bucknell University)
Robert Woodberry (University of Texas, Austin)

2. If Foreign Aid can’t do it, who can?
Sachs/Bono: “Meet millenial goals” and support NGO’s
Would meeting millenial goals help? “probably not”
Do NGO’s help?
Highly decentralized, multitudinous micro projects
That may be why they help, but it makes them hard to asses

3. Historically,
Much “citizen to citizen” development has been by church groups.
This is still true
digging wells,
building Aids clinics, orphanages
schools, etc.
These are likely to count, but how do we count them?

4. Woodberry dissertation:
Protestant missionaries in the 19th and early twentieth century
encouraged mass education (and therefore, human capital accumulation),
Greater trade-openess
Greater equality
the growth of a middle class
and democratization

5. Question
Have protestant missionaries been good for economic development, and, if so, has it been directly, or by providing an environment in which other forms of Aid have a catalytic effect?

6. The Conditional effect of Aid on Growth
git=yity aita pitp ait pitap zitzgt  at  it
git is the growth rate in country i at time t
yit is initial level of income
ait is flow of offical foreign assistance
pit is measure of “sound policies”
(f(budget, TO, govt. consuption)
ait pit is interaction term
zit is vector of control variable

7. Evaluating conditional effects of Aid
∂git/∂ait = a pitap
If “sound” policies are necessary and sufficient to render aid catalytic for growth, then
a=0
a pitap>0 …when pit is “large”

8. Table 1
Note: can’t say much given the interaction, though its clear that when Policy =0 aid has no effect. In B&D sample policy seems to help, but how much? In ELR sample policy can’t help (‘cause b3<0

9. Using B&D sample, Aid is associated with growth only when policy is fantastic
In B&D data aid doesn’t help until Policy is in upper quintile

10. So, Aid is associated with growth if
Policy score is above 2
Nearly 80% of the observations in the sample have policy score below 2
If a country has to be a super star to get Aid, is Aid the answer for Sub-Saharan Africa?

11. Is Aid endogenous?
If BDR are correct and Aid is associated with growth only under some policy conditions, treating Aid as endogenous amounts to assuming that we, the analysts know something our subjects do not.
IOW - wouldn’t donors condition their giving based on past policy effectiveness and, therefore, expected (I.e. current) growth rates?

12. Using B&D instruments, Policy is never good enough for Aid to have an effect on growth
B&D love that the coefficient on the interaction term is unchanged after “controlling for” endogeneity…
In ELR with 2SLS aid has sig neg effect when policy is bad and sig and pos effect when policy is good
But they fail to notice that the negative coefficient on Aid is 16 time larger

13. At any rate…
ELR expand the sample size by 20 percent and things go from bad to worse…

14. Aid is + but indistinguishable from zero whe Policy = 0
And interaction term is negative
Note: can’t say much given the interaction, though its clear that when Policy =0 aid has no effect. In B&D sample policy seems to help, but how much? In ELR sample policy can’t help (‘cause b3<0

15. But, Is Aid Conditioned on Instituions?
But, maybe aid is conditioned on instituions?
Pos coefficient on Aid, and positive and sig effect on interaction term are encouraging! … but only in B&D sample
Replacing Policy with Polity doesn’t fix everything

16. Aid is related to growth when: Polity score is very high and BDR sample is used
polities

17. But, what about endogeniety?
If Aid only has catalytic effect when target is a “democracy”, wouldn’t donors only give where they thought “democracy” was going to lead to higher growth rates? If so, then its likely that
growth -> aid

18. TSLS using B&D sample and instruments and Polity
Using B&D’s instruments Aid is never associated with increased growth…
TSLS using B&D sample and instruments and Polity

19. Neg coefficient on interaction effect

20. Substituing protestants?

21. Never significantly different

24. Logged number of missionaries in pos and marginally signficant until standard controls are added; Aid is almost always negative and statistically significant

25. Logged missionaries is robustly related to real per capita gdp, aid continues to be negative