Effect of Foreign Aid on Welfare in the ECOWAS region

Abstract

West Africa had been faced with a series of challenges such as droughts, famine, and armed violence that had resulted in the displacement of the people with adverse consequences on economic growth, and welfare. These challenges had led to foreign aid inflow in the form of official development assistance (ODA). This study used panel data for the period 1997 to 2020 and was analyzed using difference generalized method of moment (DIFF GMM). It was found that foreign aid had positive effect that was statistically significant on welfare (measured as per capita income) in Francophone and landlocked countries of West Africa but statistically insignificant for the whole region. The study recommends the setting up of a regional aid policy that will serve as a convergence criterion to ensure improvement in welfare.