Single correct option
The passage below is followed by four summaries. Choose the one that best captures the essence of the passage.
Economists have long debated whether foreign aid promotes economic growth in recipient countries or, by supplanting local institutions and fostering dependency, retards it. Cross-country statistical studies have produced conflicting results, in part because aid is not randomly assigned: donors tend to give more to countries experiencing crises, which mechanically associates aid with poor subsequent growth even when the aid itself is beneficial. More recent studies using instrumental-variable techniques, which isolate variation in aid unrelated to recipient conditions, find modest positive growth effects, particularly when aid is directed toward infrastructure and health rather than general budget support.
Economists have long debated whether foreign aid promotes economic growth in recipient countries or, by supplanting local institutions and fostering dependency, retards it. Cross-country statistical studies have produced conflicting results, in part because aid is not randomly assigned: donors tend to give more to countries experiencing crises, which mechanically associates aid with poor subsequent growth even when the aid itself is beneficial. More recent studies using instrumental-variable techniques, which isolate variation in aid unrelated to recipient conditions, find modest positive growth effects, particularly when aid is directed toward infrastructure and health rather than general budget support.
- A. Foreign aid has been definitively proven to harm the economic growth of recipient nations by fostering dependency.
- B. Early statistical studies on aid and growth were biased because crisis-driven aid allocation confounds results, but newer, methodologically improved studies suggest aid modestly helps growth, especially when targeted at infrastructure and health.
- C. Donor countries should stop giving general budget support and only fund infrastructure projects in developing nations.
- D. The relationship between foreign aid and economic growth has never been studied using rigorous statistical methods.
Show answer and solution
Answer: (B) Early statistical studies on aid and growth were biased because crisis-driven aid allocation confounds results, but newer, methodologically improved studies suggest aid modestly helps growth, especially when targeted at infrastructure and health.
The passage's core moves are: (1) the debate is unresolved and studies conflict, (2) this is partly because aid is non-randomly assigned to crisis countries, creating a confound, and (3) newer instrumental-variable studies correct for this and find modest positive effects, especially for infrastructure/health aid. Option 1 captures all three moves concisely. Option 0 overstates the finding as 'definitively proven' and gets the direction wrong. Option 2 draws a prescriptive conclusion the passage does not make. Option 3 directly contradicts the passage, which describes extensive statistical study.
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