Question

In his book The Elusive Quest for Growth​, development economist William Easterly discusses the relationship between foreign aid and investment in poor countries. He posits that to establish the effectiveness of aid in promoting​ investment, two tests should be​ passed: First, there should be a positive statistical association between aid and​ investment; second, aid should pass into investment 1 for​ 1, that​ is, a 1 percent​ (of GDP) increase in aid should result in a 1 percent​ (of GDP) increase in investment. Using a data set of 88 countries from 1965 to​ 1995, he finds that only 17 of 88 countries pass the first​ test, and of​ them, only 6 pass the second. Based on the information in the​ chapter, and perhaps your own​ reading, explain why foreign aid designed to spur investment usually does not work.

Answer 1

Answer:

Jay

Explanation:

Sauscey