The Effect of Foreign Aidon Growthon Per Capita Income in Selected Developing Countries

Capital formation is one of the important factors ineconomic development. Developing countries are characterized by their poor economies and ventures descend. It is not only the current reserves of capital that is low in these countries but also the concentration of capital. Due to lack of internal funds for financing in developing countries, one of the proposed solutions on an international scale is import of capital through means such as loans, credits, and grants from developed countries. Therefore, the effect of foreign aid as a foreign financial flow to developing countries to promote economic development is essential, and knowledge of these effects will lead to the right decisions for the optimal use of these contributions. This study investigates the impact of foreign aid on growth of per capita income. We employ panel data over the years 1983 to 2010 in selected developing countries in Asia, Africa and Latin America deals. The result shows the effectiveness of foreign aid on per capita income growth to be negative but small.