Impact of Foreign Aid on Poverty in the Middle East and North African (MENA) Region. A Panel Data Analysis Approach
This study’s two main objectives are as follows: Firstly, to investigate the impact of foreign aid on poverty reduction in the Middle East and North African (MENA) region. Secondly, to determine whether human capital development is a channel through which foreign aid influences poverty reduction in the MENA region. Put differently, to explore the impact of the complementarity between foreign aid and human capital development on poverty reduction in the MENA region. The study used econometric estimation approaches such as the dynamic generalised methods of moments (GMM), fixed effects, pooled ordinary least squares (OLS) and random effects with panel data spanning from 2007 to 2018. Though some minor contradictions are evident across the four econometric techniques used, the results can generally be summarized as follows: Foreign aid contributed towards poverty reduction in the MENA region. The study also noted that human capital development enhanced foreign aid’s impact on poverty reduction in the MENA region. Authorities in the MENA region should therefore implement policies aimed at attracting more foreign aid at the same time strengthening their human capital development strategies and policies in order to alleviate poverty. Further research exploring the minimum threshold levels of foreign aid enough to significantly reduce poverty in the MENA region is encouraged.
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