Aid Impact on Economic Growth: Donor Policy and Industrialization as Decisive Factors: Comparative Analysis of Japan and Ghana

This study examines the link between official development assistance (ODA) and economic growth with particular reference to donor policy and industrial policies of aid recipient countries. It first outlines the historical basis of economic growth in the post-Second World War period in Japan and adopts a strategy of comparison of economic development strategies and patterns of two countries – Japan, as one of the first aid recipients and a prominent example of a late-industrialized country with a ‘miracle’ economic growth, and Ghana, as a country with one of the highest levels of aid inflows from one side and economic stagnation from another. The research analyses the necessary conditions for assuring long-term economic growth for aid recipient countries. And finally it concludes that for aid to be effective for economic growth, a proper donor policy and industrial policies have a considerable role to play. In particular, crucial structural changes in economy which emphasize growth of manufactural production along with the increasing rate of manufactured exports are very likely to help the economy to grow. In a word, it is the appropriate donor policy which will assure the necessary level of independence for aid recipient countries to choose the export-led industrialization route that would help aid to be effective for long-term economic growth.