Saving Sudan, Starving Uganda: Aid, Growth, and Externalities in Africa

Abstract

Abstract This paper presents an analysis of aid and growth in Africa, testing an idea emerging from a case involving Sudan and Uganda. Based on this case, the primary claims made here are first that there are negative external effects associated with aid flows across sub-Saharan Africa, and second that these externalities reduce growth rates. The statistical results from an analysis of all contiguous sub-Saharan African countries, covering the period from 1960 to 2009, indicate that a typical increase in aid to a country's neighbors reduces growth in the bordering country by anywhere from .50 to 1.25 percentage points. The policy implications associated with these findings are discussed in the concluding section.

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