Foreign aid and HIV infections: evidence of causal effects from country-level panel data

Abstract

This paper considers the impact of foreign aid for HIV on the number of new infections in low middle income countries .We provide causal estimates by improving on earlier studies by addressing the endogeneity of aid disbursements through the use of instrumental variables.In addition, we effectively control for unobserved country specific effects that might jointly influence aid allocation and new infections in a country.We provide evidence on the effectiveness of foreign aid in reducing new infections of HIV across age groups, as well as separately amongst adults and children.We find a statistically significant and important negative effect of foreign aid on the number of new infections for our overall measure -across age groups and amongst adults.We find no statistically significant evidence amongst children across low middle income countries, but find evidence of strong differential effects in sub-Saharan Africa.

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