Development Cooperation, Growth and Poverty Reduction: A Survey of the Evidence

The donor community has taken a prominent role in the implementation of the Millennium Development Goals (MDGs), and is likely to stay strongly involved when it comes to achieving the poverty-oriented targets of the Sustainable Development Goals (SDGs). Against this background, the present paper provides an overview of the empirical evidence regarding the impact of international development cooperation on economic growth, (monetary and non-monetary) poverty and inequality in order to assess whether donors have directly or indirectly contributed to achieving internationally agreed upon poverty reduction targets. The general conclusion is that development cooperation can help achieve growth and poverty reduction in partner countries, even though the effects are likely to be modest. Most confidence can be put into the finding that, in accordance with the MDGs, aid for social infrastructure has contributed to achieving non-monetary goals such as higher school enrollment and lower infant mortality. In contrast, it is inherently difficult to empirically identify income effects of foreign aid at the macro level, which the long-standing and still unresolved debate about the aid–growth relationship illustrates.