Year of Publication



Martin School of Public Policy and Administration

Date Available


Executive Summary

The U.S. is investing billions of dollars in developing countries. U.S. development aid is an essential part of U.S. foreign policy. The objectives laid down by the architects of development aid are wide and range from strategic, economic and social uplift of poor countries to humanitarian assistance to alleviate the suffering of residents. There is a tense political and academic debate about the impacts of development aid funded by the U.S. There are many who believe funds support dictators, while others consider aid to be a real help to fragile economies.

Pakistan is one of the biggest recipients of U.S. development aid but public opinion among Pakistanis is divided over of the nature of the aid received. The argument forwarded by some is that the aid supports U.S. strategic interests at the expense of social uplift, economic growth and good governance for citizens. Others argue that, while not perfectly successful, the development aid does help spur the desired development.

The lower middle income countries that have received U.S. development aid are analyzed with cross section panel data of indicators related to economic, social and good governance factors. This data are taken from World Bank Data 2010 and the U.S. aid data are from USAID Green Book 2010. The U.S. aid received is treated as a dependent variable and social, economic and governance indicators are evaluated as explanatory variables.

The results indicate that U.S. development aid is associated with improvements in economic and social indicators, but U.S. aid was not found to be associated with indicators of good governance. It is recommended that, while U.S. should better monitor elements of good governance and proper use of funds when releasing aid, but it is the major responsibility of recipient countries follow good governance practices in order to enjoy the full benefits of foreign funding and attract more funding.

There are many caveats in the study ranging from data limitations to the selection of variables and the reliability of model. Despite these deficiencies, it is believed to be a positive addition to the few existing studies on this subject.



To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.