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Editor's Notes

Joshua Drouin received his BS in Economics at Murray State in Spring 2017. This research is his Honors thesis, completed as part of the Honors diploma. His thesis mentor was Dr. David Eaton.

Abstract

The effects of aid on economic development is topic typically studied from the perspective of corruption and allocative efficiency. We examine aid to less developed nations from a different viewpoint; assuming aid reaches the intended recipients, does it actually benefit them? We utilize Indonesia and the 2004 earthquake and tsunami as a natural experiment to observe the influx of aid, and compare the regions development before and after the disaster. By establishing a baseline before the disaster, and utilizing a new start point after the destruction, we can gauge the reconstruction efforts and observe whether aid is beneficial or harmful. Ultimately, our results show that aid is likely beneficial, both in terms of preparation and in terms of economic development and reconstruction. Aid promotes the growth of forward linkages at the expense of backward linkages, but overall, the gains to infrastructure, and the potential for future growth, far outweigh the short-term burdens of displacement by the influx of aid.

Creative Commons License

Creative Commons Attribution 4.0 License
This work is licensed under a Creative Commons Attribution 4.0 License.

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