What is the impact of development aid on economic growth?

This critical question has been the topic of debate among development experts, economists, policymakers, civil society, and business – especially here on NextBillion.net. Some answers may be emerging, and they point out that development aid is not sufficient to stimulate broad economic growth (thanks, AdamSmithee):

The conclusions: aid had a small, statistically insignificant positive effect on investment and a small, statistically significant negative effect on savings. Overall, aid has a small, statistically insignificant positive impact on growth, with more recent studies suggesting an ever-smaller impact. The evidence for aid working better in good policy environments is very weak, the evidence for declining marginal returns is a little stronger...Ignoring the issue of significance, the metastudy results suggest that aid has increased the income per capita in poor countries as a whole by 20 percent since the 1960s.

Private sector strategies have shown effectiveness at the micro level; there aren’t enough data points for a macro level study such as this one by Doucouliagos and Paldam. Their study analyzes a broad set of robust economic literature, and finds that development aid hasn’t been terribly effective – isn’t it time to admit that aid itself is not sufficient, and that there’s room for private sector involvement in poverty reduction?

(Originally via PSD Blog)