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Recent studies and approaches to foreign aid effectiveness have concentrated on its impact on economic growth. But aid’s main goal is poverty reduction, not economic growth. In this paper, aid’s impact on poverty, growth, and inequality are analyzed. A 97 country sample is used for the 1981-2001 time period. Both, panel data and cross-section econometric techniques, are used. The main finding is that economic growth reduces poverty, but also aid, although less than growth, and not under linearity assumptions. Data limitations and econometric assumptions lead to the recommendation of adding impact evaluations and country-case studies to “classic” aggregate approaches and methodologies, before coming to false conclusions and empirical evidence of foreign aid’s effect on poverty.
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