Aid and fertility: What does the cross-country evidence show?

This paper examines the effects of foreign aid on fertility rates in recipient countries using Rajan and Subramanian’s (2008) cross-sectional and panel methods. Our cross-section results suggest that foreign aid has a positive effect on fertility. Interestingly, social sector aid (but not economic aid) is responsible for this demographic effect. The panel evidence confirms the positive effect of foreign aid on total fertility rates, and that social aid is more relevant than economic aid. Given that the literature has found no robust relationship between foreign aid and economic growth, our findings raise the possibility of an aid-induced population poverty trap.