William Easterly examines the effectiveness of foreign aid in promoting economic growth, focusing on the influential study by Burnside and Dollar (2000). The authors found that foreign aid positively impacts growth in developing countries with good fiscal, monetary, and trade policies. However, this finding was widely misinterpreted and used to advocate for increased foreign aid without further testing. Easterly critiques the process by which the Burnside and Dollar results were disseminated and applied, highlighting the lack of robustness and broader applicability of their findings. He presents empirical evidence showing that the interaction term between aid and policy is insignificant in expanded datasets and under different definitions of "aid," "good policy," and "growth." Easterly also discusses the theoretical framework of the "financing gap" model, which posits that aid increases investment and growth, but finds it to be poorly supported by empirical evidence. He concludes by advocating for more modest objectives for foreign aid and greater emphasis on selective and evaluative approaches to ensure its effectiveness.William Easterly examines the effectiveness of foreign aid in promoting economic growth, focusing on the influential study by Burnside and Dollar (2000). The authors found that foreign aid positively impacts growth in developing countries with good fiscal, monetary, and trade policies. However, this finding was widely misinterpreted and used to advocate for increased foreign aid without further testing. Easterly critiques the process by which the Burnside and Dollar results were disseminated and applied, highlighting the lack of robustness and broader applicability of their findings. He presents empirical evidence showing that the interaction term between aid and policy is insignificant in expanded datasets and under different definitions of "aid," "good policy," and "growth." Easterly also discusses the theoretical framework of the "financing gap" model, which posits that aid increases investment and growth, but finds it to be poorly supported by empirical evidence. He concludes by advocating for more modest objectives for foreign aid and greater emphasis on selective and evaluative approaches to ensure its effectiveness.