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31/07/2022
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Nguyen Phuc, P. H., Huynh, A. N. Q., Reisach, U., & Kim, X. L. T. (2022). How does Japanese ODA really contribute to economic growth for ASEAN countries?. Journal of International Economics and Management, 22(2), 71-83. https://doi.org/10.38203/jiem.022.2.0049
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How does Japanese ODA really contribute to economic growth for ASEAN countries?
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Abstract
Japan has provided ODA funding for promoting economic development in ASEAN countries for a long time. This study aims to verify how Japan’s ODA contributes to economic growth of the ASEAN countries during the period of 2008-2020. Based on the Cobb-Douglas production function, we build a model to estimate the effects of the ODA funding on economic growth. The results show that the ODA exhibits a significantly positive relationship with economic growth of these countries. A one percent increase in the ODA inflow contributes to the economic growth by 0.226 percent. Capital and labor are important factors driving the economic growth while FDI has a negligible impact.
Article Details
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Keywords
Japanese ODA, Economic growth, ASEAN countries
References
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Blair, R.A. and Winters, M.S. (2020), “Foreign aid and state-society relations: theory, evidence, and new directions for research”, Studies In Comparative International Development, Vol. 55, pp. 123 - 142.
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Chenery, H.B. and Carter, N.G. (1973), “Foreign assistance and development performance, 1960-1970”, American Economic Association, Vol. 63 No. 2, pp. 459 - 468.
Dhahri, S. and Omri, A. (2020), “Does foreign capital really matter for the host country agricultural production? Evidence from developing countries”, Review of World Economics, Vol. 156 No. 1, pp. 153 - 181.
Domar, E.D. (1946), “Capital expansion, rate of growth and employment”, Econometrica, Vol. 14, pp. 137 - 147.
Dreher, A. and Langlotz, S. (2015), “Aid and growth. New evidence using an excludable instrument”, CESifo Working Paper Series 5515, CESifo Group Munich.
Driffield, N. and Jones, C. (2013), “Impact of FDI, ODA and migrant remittances on economic growth in developing countries: a systems approach”, The European Journal of Development Research, Vol. 25 No. 2, pp. 173 - 196.
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Easterly, W., Levine, R. and Roodman, D. (2003), “New data, new doubts: a comment on Burnside and Dollar’s “Aid, policies, and growth” (2000)”, American Economic Review, Vol. 94 No. 3, pp. 774 - 780.
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Morrissey, O. (2001), “Does aid increase growth”, Progress in Development Studies, Vol. 1. No. 1, pp. 37 - 50.
Murphy, R.G. and Tresp, N.G. (2006), Government policy and the effectiveness of foreign aid, Department of Economics, Boston College.
Musibau, H.O., Yusuf, A.H. and Gold, K.L. (2019), “Endogenous specification of foreign capital inflows, human capital development and economic growth”, International Journal of Social Economics, Vol. 46 No. 3, pp. 454 - 472.
Nasir, M.A., Huynh, T.L.D. and Tram, H.T.X. (2019), Role of financial development, economic growth & foreign direct investment in driving climate change: a case of emerging ASEAN, Journal of Environmental Management, Vol. 242, pp. 131 - 141.
Ouattara, B. and Strobl, E. (2003), “Disaggregating the aid and growth relationship”, School of Economic Studies Discussion Paper No. 0414, University of Manchester, Manchester.
Papanek, G.F. (1973), “Aid, foreign private investment, saving, and growth in less developed countries”, Journal of Political Economy, Vol. 81, pp. 120 - 130.
Raheem, I.D. and Adeniyi, O.A. (2015), “Capital inflows and outflow and economic growth in SubSaharan Africa”, International Journal of Economics and Business Research, Vol. 10 No. 1, pp. 66 - 80.
Ramiarison, H.A. (2010). “Assessing the developmental role of foreign aid in developing countries: a special reference to the role of Japan's Aid in Far East Asia”, Working paper No. 462, Institute of Developing Economies, Japan External Trade Organization.
Sahoo, K. and Sethi, N. (2017), “Impact of foreign capital on economic development in India: an econometric investigation”, Global Business Review, Vol. 18 No. 3, pp. 766 - 780.
Singh, R.D. (1985), “State intervention, foreign economic aid, savings and growth in LDCs: some recent evidence”, KYKLOS, Vol. 38, pp. 216 - 232.
Snyder, D.W. (1993), “Donor bias toward small countries: an overlooked factor in the analysis of foreign aid and economic growth”, Applied Economics, Vol. 25, pp. 481 - 488.
Trinidad, D.D. (2018), “What does strategic partnerships with ASEAN mean for Japan’s foreign aid?”, Journal of Asian Security and International Affairs, Vol. 5 No. 3, pp. 267 - 294.
Yiew, T.H. and Lau, E. (2018), “Does foreign aid contribute to or impeded economic growth”, Journal of International Studies, Vol. 11 No. 3, pp. 21 - 30.
Adebayo, T.S. and Kalmaz, B.D. (2020), “Ongoing debate between foreign aid and economic growth in Nigeria: a wavelet analysis”, Social Science Quarterly, Vol. 101 No. 5, pp. 2032 - 2051.
Araki, M. (2007), “Japan's official development assistance: the Japan ODA model that began life in Southeast Asia”, Asia Pacific Review, Vol. 14 No. 2, pp. 17 - 29.
Azam, M. and Feng, Y. (2022). “Does foreign aid stimulate economic growth in developing countries? Further evidence in both aggregate and disaggregated samples”, Quality & Quantity, Vol. 56 No. 2, pp. 533 - 556.
Blair, R.A. and Winters, M.S. (2020), “Foreign aid and state-society relations: theory, evidence, and new directions for research”, Studies In Comparative International Development, Vol. 55, pp. 123 - 142.
Burnside, C. and Dollar, D. (2004), “Aid, policies, and growth revisited”, American Economic Review, Vol. 94, pp. 781 - 784.
Bobowski, S. (2019), “Official Development Assistance (ODA) of Japan in the twenty-first century: implications for connectivity of ASEAN region”, in Eurasian Economic Perspectives, Springer, Cham, pp. 207 - 235.
Chenery, H.B. and Strout, A.M. (1966), “Foreign assistance and economic development”, The American Economic Review, Vol. 56 No. 4, pp. 679 - 733.
Chenery, H.B. and Carter, N.G. (1973), “Foreign assistance and development performance, 1960-1970”, American Economic Association, Vol. 63 No. 2, pp. 459 - 468.
Dhahri, S. and Omri, A. (2020), “Does foreign capital really matter for the host country agricultural production? Evidence from developing countries”, Review of World Economics, Vol. 156 No. 1, pp. 153 - 181.
Domar, E.D. (1946), “Capital expansion, rate of growth and employment”, Econometrica, Vol. 14, pp. 137 - 147.
Dreher, A. and Langlotz, S. (2015), “Aid and growth. New evidence using an excludable instrument”, CESifo Working Paper Series 5515, CESifo Group Munich.
Driffield, N. and Jones, C. (2013), “Impact of FDI, ODA and migrant remittances on economic growth in developing countries: a systems approach”, The European Journal of Development Research, Vol. 25 No. 2, pp. 173 - 196.
Duc, V.M. (2006), “Foreign aid and economic growth in the developing countries: a cross-country empirical analysis”, Available at http://cnx.org/content/m13519/latest/ (Acccessed 02 January, 2022).
Easterly, W., Levine, R. and Roodman, D. (2003), “New data, new doubts: a comment on Burnside and Dollar’s “Aid, policies, and growth” (2000)”, American Economic Review, Vol. 94 No. 3, pp. 774 - 780.
Fayissa, B. and El-Kaissy, M.I. (1999), Foreign aid and economic growth of developing countries (LDCs): further evidence”, Studies in Comparative International Development, Vol. 34, pp. 37 - 50.
Galiani, S., Knack, S., Xu, L.C. and Zou, B. (2017), “The effect of aid on growth: evidence from a Quasi-experiment”, Journal of Economic Growth, Vol. 22, pp. 1 - 33.
Hanushek, E.A. and Kimko, D.D. (2000), “Schooling, labor-force quality, and the growth of nations”, American Economic Review, Vol. 90 No. 5, pp. 1184 - 1208.
Huynh, T.L.D. (2020), “The effect of uncertainty on the precious metals market: new insights from Transfer Entropy and Neural Network VAR”, Resources Policy, Vol. 66, 101623.
Knack, S. (2000), “Aid dependence and the quality of overnice: a cross-country empirical analysis”, World Bank Policy Research Paper.
Lee, H.H. and Tan, H.B. (2006), “Technology transfer, FDI and economic growth in the ASEAN region”, Journal of the Asia Pacific Economy, Vol. 11 No. 4, pp. 394 - 410.
Lewis, L., Williams, M. and Olds, T. (2012), “The active cycle of breathing technique: a systematic review and meta-analysis”, Respiratory Medicine, Vol. 106 No. 2, pp. 155 - 172.
Liew, C., Mohamed, M.R. and Mzee, S.S. (2012), “The impact of foreign aid on economic growth of East African countries”, Journal of Economics and Sustainable Development, Vol. 3 No. 12, pp. 129 - 138.
McArthur, J.W. and Sachs, J.D. (2019), “Agriculture, aid, and economic growth in Africa”, The World Bank Economic Review, Vol. 33 No. 1, pp. 1 - 20.
MOFA. (2020), “Specific Initiatives of Japan’s Development Cooperation”, White Paper on Development Cooperation, pp. 90 - 103.
MOFA. (2021), “Japan's COVID-19 related cooperation towards achieving UHC”, Japan ‘s Response to COVID -19 for Developing Countries, pp. 1 - 2.
Morrissey, O. (2001), “Does aid increase growth”, Progress in Development Studies, Vol. 1. No. 1, pp. 37 - 50.
Murphy, R.G. and Tresp, N.G. (2006), Government policy and the effectiveness of foreign aid, Department of Economics, Boston College.
Musibau, H.O., Yusuf, A.H. and Gold, K.L. (2019), “Endogenous specification of foreign capital inflows, human capital development and economic growth”, International Journal of Social Economics, Vol. 46 No. 3, pp. 454 - 472.
Nasir, M.A., Huynh, T.L.D. and Tram, H.T.X. (2019), Role of financial development, economic growth & foreign direct investment in driving climate change: a case of emerging ASEAN, Journal of Environmental Management, Vol. 242, pp. 131 - 141.
Ouattara, B. and Strobl, E. (2003), “Disaggregating the aid and growth relationship”, School of Economic Studies Discussion Paper No. 0414, University of Manchester, Manchester.
Papanek, G.F. (1973), “Aid, foreign private investment, saving, and growth in less developed countries”, Journal of Political Economy, Vol. 81, pp. 120 - 130.
Raheem, I.D. and Adeniyi, O.A. (2015), “Capital inflows and outflow and economic growth in SubSaharan Africa”, International Journal of Economics and Business Research, Vol. 10 No. 1, pp. 66 - 80.
Ramiarison, H.A. (2010). “Assessing the developmental role of foreign aid in developing countries: a special reference to the role of Japan's Aid in Far East Asia”, Working paper No. 462, Institute of Developing Economies, Japan External Trade Organization.
Sahoo, K. and Sethi, N. (2017), “Impact of foreign capital on economic development in India: an econometric investigation”, Global Business Review, Vol. 18 No. 3, pp. 766 - 780.
Singh, R.D. (1985), “State intervention, foreign economic aid, savings and growth in LDCs: some recent evidence”, KYKLOS, Vol. 38, pp. 216 - 232.
Snyder, D.W. (1993), “Donor bias toward small countries: an overlooked factor in the analysis of foreign aid and economic growth”, Applied Economics, Vol. 25, pp. 481 - 488.
Trinidad, D.D. (2018), “What does strategic partnerships with ASEAN mean for Japan’s foreign aid?”, Journal of Asian Security and International Affairs, Vol. 5 No. 3, pp. 267 - 294.
Yiew, T.H. and Lau, E. (2018), “Does foreign aid contribute to or impeded economic growth”, Journal of International Studies, Vol. 11 No. 3, pp. 21 - 30.