Sector Specific Aid Inflow, Institutional Quality and Human Development in Selected Developing Countries

Abstract

Sector specific aid inflow has been considered significant for improved human development in developing economies. For this, we have analyzed how sector specific aid inflows and institutional quality affect human development by using panel data from 18 developing economies between 2002 and 2018. We have used a single equation linear model generalized method of moments (GMM) to examine the relationship between dependent and independent variables. The data has been taken from World Development Indicators, World Bank, and Organization for Economic Cooperation and Development. The result showed that aid and institutional quality were positively and significantly linked with the human development index. More aid was justified if stronger economic, political, and institutional governance could be secured in the receiving nations and the requirement for institutional improvements to make aid an influential instrument for human development in the concerned economies. The study suggests for more proper allocation of aid commitments among these countries for high growth and development. There should be a stable economic and political environment and high trade with other countries.