FOREIGN AID EFFECTIVENESS IN OIC MEMBER COUNTRIES: BEYOND ECONOMIC INDICATORS

This paper examines whether official development assistance (ODA) is an effective tool for human development and progress of recipient OIC (Organization of Islamic Cooperation) member countries. The paper estimates the impact of aid on social indicators rather than on economic growth. It measures the impact of ODA classified by sectors on the components of Human Development Index (HDI): standards of living, life expectancy, and education indices. It controls for the magnitude of civil violence, population growth, foreign direct investment, income, urbanization and regime type; whether a regime is democratic or autocratic. It utilizes annual data between 2002 and 2015 for OIC member countries. Results indicate that ODA is an effective tool for human development, having a greater and a more efficient impact on human development than other development instruments included in the analysis. We also find that civil violence is a powerful deterrent of HDI. Based on these results, the paper suggests increasing ODA, particularly, to health and education sectors, and intensifying efforts to prevent and reduce civil violence as well as monitoring and managing post-conflict states to cope with the risk of relapsing into conflict.