Foreign Aid and Human Development: The Impact of Foreign Aid to the Health Sector

The appropriate role of foreign aid in promoting economic development has long been debated. With the recent change of focus from economic to human development, it is timely to investigate the effectiveness of aid in promoting human development. This paper is the first to empirically test the hypothesis that increases in human welfare can be achieved through health sector specific foreign aid. My results indicate that foreign aid is ineffective at increasing overall health and is an unsuccessful human development tool. These results hold after controlling for reverse causality and are robust to different model specifications.