Date on Honors Thesis

Spring 5-1-2017


Economics and Finance

Examining Committee Member

Dr. David Eaton, Advisor

Examining Committee Member

Dr. David Brasfield, Committee Member

Examining Committee Member

Dr. Jim McCoy, Committee Member

Examining Committee Member

Dr. Warren Edminster, Executive Director Honors College


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.