Dynamics of Foreign Aid and Human Development in South and South-East Asia: Analyzing the Effectiveness of Macro-Institutional Factors

Abstract

Does foreign aid impede or catalyze human development in South and South-East Asia post-1990s? We argue that foreign aid impacts human development negatively in the region overall due to the structural differences in infrastructure development, democratic regimes, patterns of external debt, trading intensity and other macroeconomic factors. Our empirical evidence further justifies that other than aid, improvements in infrastructure sectors and quality of democratic settings beget human development in the region. Considering further angles of external debt and domestic investment into the picture, we find that rising external debt negates, improves domestic investment and accelerates human development. While comparing both regions, we find a noticeable difference in the impacts of macro-institutional factors on human development. However, the impacts of aid on human development remain insignificant.

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